The upward trajectory of Texas's commercial real estate market should come as no surprise. The state's business-friendly nature means low taxes. Texas also has a constantly growing population and new people are constantly moving into new commercial spaces/
Navigating commercial lease agreements can be tricky for landlords, so we're going to discuss:
- What commercial leases are
- Common commercial lease types
- The sections of these Austin lease agreements
Read on to demystify commercial property contracts!
The Basics of Commercial Lease Agreements
Commercial lease agreements are rental contracts. You draft up the contract and work with high-quality commercial tenants to fine-tune it. Once you've negotiated the contract, the lessee moves their business operations into your building.
Several types of buildings require commercial lease contracts:
- Office buildings
- Retail store space
- Restaurant space
- Warehouses
- Industrial plants
Commercial property leasing is different from renting out housing. Lease contracts will:
- Be three to five years long (as opposed to one-year residential leases)
- Have higher rent rates than residential leases would
- Lease out a specific section of the multi-tenant commercial building
Types of Commercial Leases
There are three common types of commercial leases.
The first, a gross lease, lets the tenant pay a predetermined flat rental fee. You, as the landlord, pay for:
- Taxes
- Maintenance
- Insurance
A net lease requires the tenant to pay both a fixed rental rate and all these other fees. This lessens the burden on you as a landlord. However, it also may not be as competitive as a property that offers a gross lease would be.
A modified gross lease offers the best of both worlds.
You and your new commercial tenant sit down and decide what individual expenses each party will cover. For example, the renter might pay rent and taxes while you pay for maintenance and insurance.
What Goes on Business Lease Contracts?
No leasing terms guide would be complete without making note of the sections of a commercial lease contract. The most important include:
- How much rent the tenant must pay
- When rent is due (monthly, quarterly, etc)
- The length of the lease
- Who pays for the utilities
- What utilities each party pay for
- Who pays taxes
- Who pays for insurance
- When the lease terminates
- What happens if the landlord sells the property
There should also be a section dedicated to use clauses. These clauses specify what the tenant can and can't do while in the building.
This usually notes what types of goods and services they can offer. It also specifies whether the tenant can erect signage or perform renovations (like painting and re-tiling).
Learn the Value of Texas Commercial Rentals
Now that you know the ins and outs of commercial lease agreements, it's time to rent out your Texas property for the highest passive income possible. PMI Austen Experts are committed to helping with all aspects of commercial property leasing.
We'll draw up business lease contracts and help you find the perfect renters for your commercial building. Request a free rental analysis to learn how much you can profit from your unit!
