Last updated October 26, 2026
What is a Commercial Lease Agreement?
A commercial lease agreement is the contract between the owner of a business property and the company or person who rents it to run a business. It covers the space being let, what it may be used for, how long the tenancy runs, what the rent is and how it rises, who pays the taxes, insurance, utilities and upkeep, and what happens if either side falls short. You may also see it called a business lease, a commercial rental agreement or an office, retail or industrial lease.
Unlike a home rental, a commercial tenancy is a deal between two businesses, and the law largely leaves the terms to the two of you. That makes the written document the whole of the bargain: if a point is not in the lease, there is usually no statute that fills the gap.
Which properties count as commercial?
- Office — a suite, a floor or a whole building used for professional work.
- Retail — a storefront, a unit in a strip mall or a space in a shopping centre.
- Restaurant — a space fitted or to be fitted for food service, often with its own rules on hours, grease, venting and signage.
- Industrial — a workshop, a plant or a light-manufacturing unit.
- Warehouse — storage and distribution space, with loading, yard and vehicle-access terms.
- Mixed or other — a studio, a clinic, a gym, a salon, a kiosk; describe it and AI Lawyer writes the lease around it.
Gross, net or triple net?
The biggest decision in a commercial lease is who carries the building's running costs.
- Gross lease — the tenant pays one rent figure and the landlord pays the property taxes, building insurance and common-area maintenance out of it. Simple for the tenant; the landlord takes the risk of rising costs.
- Net lease — the tenant pays a lower base rent plus a share of one or more of the building's costs. A single net lease adds property taxes; a double net adds insurance as well.
- Triple net (NNN) lease — the tenant pays base rent plus its share of taxes, insurance and maintenance. Common for retail and stand-alone buildings; the landlord's income is predictable and the tenant controls, and pays for, the space.
- Modified gross — a negotiated split: the tenant pays some costs (often utilities and janitorial) and the landlord the rest.
AI Lawyer asks which type you want, then who pays each utility, operating cost and insurance line, and writes the lease to match.
What the agreement should cover
- The premises and permitted use — the address, a description of the space (square footage, floor, unit, any diagram), parking, and exactly what business may be carried on there. An exclusivity clause can stop the landlord letting a neighbouring unit to a direct competitor.
- The term — the start and end dates of a fixed term, or a periodic tenancy; an early-possession date for fitting out; renewal options and whether the renewal is on the same terms.
- Rent and increases — the amount, when and where it is paid, built-in increases, late charges and any grace period, and any rent paid in advance.
- Security deposit — the amount and how long the landlord has to return it after the lease ends.
- Costs and insurance — who pays each utility and operating cost, who insures the building and the contents, and whether the tenant must show proof of cover.
- Improvements and fixtures — what the landlord will build before move-in, what the tenant may alter, and who owns the improvements and any equipment when the lease ends.
- Assignment and subleasing — whether the tenant may hand the lease to a buyer of the business or sublet part of the space, and on what conditions.
- Options — an option to purchase the property, with the price or how it will be set, and any option fee.
- Default and enforcement — the notice the landlord gives before ending the lease for unpaid rent or another breach, who pays legal costs in a dispute, inspection reports at move-in and move-out, and a guarantor if one is signing.
- Signatures — dated signatures for the landlord and the tenant (and the guarantor), with the signing organisations named in full.
How it differs from a residential lease
A residential lease is hedged by consumer-protection law: deposit caps, repair duties, notice periods and disclosures that the landlord cannot contract out of. A commercial lease has few of those guard-rails. Terms run longer (three, five or ten years is normal), almost everything is negotiable, the tenant usually pays for more of the building's costs, and the tenant often takes on repairs inside the premises. That freedom is useful, but it means both sides should read every clause as if it will be enforced exactly as written — because it will be.
Who does what
The landlord typically delivers the space in the agreed condition, keeps the structure, roof and common areas in repair, carries the building insurance, and gives the tenant quiet enjoyment of the premises for the term.
The tenant typically pays rent and its share of costs on time, uses the premises only for the permitted purpose, keeps the inside in good order, carries liability and contents insurance, follows the rules on signage, hours and alterations, and hands the space back in the agreed state.
How AI Lawyer writes your lease
You answer plain questions — the kind a commercial agent would ask you across a desk — and AI Lawyer drafts the full agreement in complete sentences. Choose a standard lease for a straightforward tenancy or the comprehensive version when the deal has moving parts: options, improvements, a guarantor, an exclusivity clause. Read it through, ask for changes in plain English ("make the renewal rent market rate"), and it redrafts. When it looks right, download it as a PDF or Word file, email it to the other side, or print it for signatures. The document stays in your account for the next unit or the next tenant.
Frequently asked questions
- How long should a commercial lease run?
- Three to five years is the most common range; retail and restaurant tenants who invest in a fit-out often want longer, with renewal options. A new business may prefer a shorter first term with an option to renew.
- How much is the deposit?
- There is no legal cap for most commercial tenancies. One to three months' rent is usual; a landlord may ask for more from a new company without a trading history, or accept a personal guarantee instead.
- Are utilities and taxes included in the rent?
- Only if the lease says so. In a gross lease they are; in a net or triple net lease the tenant pays them on top of the base rent. AI Lawyer asks you line by line, so the answer is written into the agreement.
- Can the tenant sublet or sell the business with the lease?
- Only with the landlord's consent, unless the lease allows it. Most leases let the tenant assign or sublet with consent that cannot be unreasonably withheld — you choose how to handle it when you answer the questions.
- Do I need an account to start?
- No. Start answering questions right away; you create an account when you download the finished lease.
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