Arizona Commercial Lease Agreement Template
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An Arizona Commercial Lease Agreement, in compliance with local laws, establishes a reciprocal commitment between you and your landlord. This accord grants you permission to occupy a property for your business pursuits, on mutually agreed terms and rates. Designed to align with your venture's specific endeavors, be certain to grasp its every component prior to affixing your signature.
What are the related laws for Commercial Lease Agreements in Arizona?
Article 504 of Title 42 from the Arizona Revised Statutes specifically handles rentals. This encompasses assorted practices, terminologies, and provisions governing the establishment, adjustment, execution, and infringement of leasing agreements.
Incorporated within this portion of the legislation:
- Section 42-5041 clarifies definitions, cataloging numerous terminologies pertinent to leasing agreements and their corresponding interpretations.
- Section 42-5069 manages liability scenarios, illustrating when and under what circumstances the liability from goods arises.
- Section 42-5061 designates the statute of limitations for resolving leasing contract disputes. It notes that the parties may reduce the duration of the limitation period to no less than twelve months.
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How to write a Commercial Lease Agreement
As an entrepreneur, the intricate legal language of a lease agreement may be overwhelming. But fear not! Equipped with a comprehensible plan and helpful guidance, you can navigate through the drafting process confidently. Together, let's unpack the fundamentals of commercial lease agreements and customize them to fit your requirements. Think of this as a casual and plain-spoken tutorial, designed to empower you to traverse the landscape of commercial leasing with ease.
1. Permitted Uses
The "Authorized Uses" provision instructs you on how to utilize the leased premises. It distinctly delineates the permitted activities. These could cover manufacturing operations, administrative tasks, warehousing, delivery, and production and dispatch of goods.
It's vital to comprehensively catalog all foresighted commercial operations here. This precision aids in dodging potential legal hurdles and facilitates a well-organized allotment of resources. Enter each nuance to navigate clear of unexpected twists. Gaining this comprehension keeps your business journey aligned.
Industrial and light manufacturing, warehousing, office, distribution, and assembly, including designing, manufacturing and distributing branded merchandise and promotional products, including all activities incident or ancillary thereto and all other lawful uses and purposes.
2. Term and Option to Extend
(a) This pertains to the lease duration and renewals. It commences on the Beginning Date and concludes on the Termination Date. You have the option to prolong for two additional two-year terms under identical terms, although the rent may escalate. Affirm your intent to extend by notifying the landlord in written form a minimum of 30 days before the duration concludes.
(b) "Duration" encompasses both your initial lease period along with any possible renewals.
Transparent regulations regarding lease duration are critical for business strategy and functioning, as well as for potential prolongations.
(a) The initial term of this Lease will commence on the Effective Date and expire on the Expiration Date. The Tenant may extend the Term of this Lease for [two] additional [two]-year extension term(s), on all the same terms and conditions (except for Rent, which will increase during extension Terms as provided below) contained in this Lease, by notifying the Landlord in writing of the Tenant’s election to do so not less than 30 days before the expiration date of the then-current Term, as the case may be.
(b) The initial term and any applicable extension term are referred to in this Lease as the “Term.”
3. Repairs and Maintenance
The "Upkeep and Repairs" provision specifies who takes on repair duties. It addresses both indoor and outdoor concerns, such as malfunctioning plumbing or impaired masonry. The expense is shouldered by the landlord, not you.
If a repair is overlooked or delayed, you have the right to initiate the necessary work and deduct its cost from your rent obligation. It's always wise to record these incidents as they may come in handy later. Understanding this clause is key; it delineates accountability in case of repairs, safeguarding your venture from unforeseen expenditures.
From and after the Effective Date, and for the remainder of the Term, the Landlord shall perform ordinary maintenance and repair of the interior of the improvements on the Premises. In addition, the Landlord shall, at its own cost and expense without reimbursement by the Tenant, keep and maintain in good condition and repair, and make all necessary repairs and replacements to, the exterior walls, building slabs, foundations, structural parts and components, parking lots, gutters, downspouts, roof, roof membrane and coverings and any other part, component or system on the exterior of the Premises. The Landlord shall, at its own cost and expense without reimbursement by the Tenant, keep and maintain in good condition and repair, and make all necessary repairs and replacements to the sprinkler system, mechanical, HVAC, electrical and plumbing systems of the Premises. If the Landlord fails to perform any repair or replacement required to be made by the Landlord in this Lease, and the Landlord fails to cure such failure within 15 days after receipt of a written demand from the Tenant (or immediately, in the case of emergency repairs, including loss of heating and air conditioning), then the Tenant may make such repair or replacement and the Landlord shall reimburse the Tenant for the cost thereof. If the Landlord fails to pay such amount, then the Tenant may offset against the Rent due hereunder the amount so expended.
4. Alterations
"Modifications" sets forth your rights to alter the leased estate. Changes could be made without the need for landlord's approval, but significant modifications remain the landlord's asset. You're permitted to remove personal belongings like shelving or machinery, provided it doesn't inflict harm on the property. Grasping this provision can ward off disagreements and assist in strategizing your business configuration efficiently.
The Tenant may, at its own cost and expense and in a good workmanlike manner, make such alterations, additions, or improvements or erect, remove, or alter such partitions, or erect such racks, shelves, bins, machinery, furniture, fixtures, trade fixtures, equipment, and other personal property as it may deem advisable, without the consent of the Landlord. All fixtures and permanent alterations, additions, improvements, and partitions erected by the Tenant will be and remain the property of the Landlord during the Term, and will be abandoned by the Tenant at the expiration of this Lease. All racks, shelves, bins, machinery, furniture, equipment, and other personal property located in the Premises as of the Effective Date or otherwise installed by the Tenant may be removed by the Tenant at any time if the Tenant so elects. All such removals and restoration shall be accomplished so as not to damage the primary structure or structural qualities of the buildings and other improvements situated on the Premises.
5. Insurance
The "Insurance" provision secures both lessee and lessor. As a tenant, you must acquire property and liability coverage, designating the landlord as an extra insured party. The landlord handles insurance for any damages to the property.
'Waivers of subrogation' halt insurers from pursuing the other individual after incurring a loss. Make sure your insurance provider informs the landlord 30 days prior to policy termination. Familiarizing yourself with these conditions reinforces your business' financial safety.
(a) At all times during the Term, the Tenant shall maintain, at its sole cost and expense, policies of insurance containing the following insurance coverages (which policies shall name the Landlord as an additional insured):
(1) Property insurance with premiums paid in advance insuring the Tenant’s property using the standard Special Causes of Loss Form or equivalent for the full replacement value. The foregoing is referred to in this Lease as “Property Insurance.”
(2) Commercial general liability insurance with respect to the Premises in amounts not less than $1,000,000 per occurrence, $2,000,000 aggregate limit using current ISO forms or equivalent.
(b) The Landlord shall obtain and keep in force during the Term of this Lease a policy or policies of insurance covering loss or damage to the Premises, in the amount of the full replacement value thereof, as the same may exist from time to time, but in no event less than the total amount required by lenders having liens on the Premises, against all perils included within the classification of fire, extended coverage, vandalism, malicious mischief, flood (in the event same is required by a lender having a lien on the Property), and special extended perils ("all risk" as such term is used in the insurance industry). Such insurance must provide for a payment of loss thereunder to the Landlord or to the holder of mortgages or deeds of trust on the Premises.
(c) The policies required by this section must provide for standard waivers of any right of subrogation that the insurer of such party may acquire against the other party to this Lease, for losses that are actually insured against, even if the loss results from a negligent act or omission. The Tenant’s insurance company must provide the Landlord with a certificate of insurance on form ACORD-27 (for Property Insurance required to be carried under this Lease), or its equivalent, and ACORD-25 (for liability insurance required to be carried under this Lease), or its equivalent, which provides that the insurance may not be cancelled without giving the named insured at least 30 days’ prior written notice (or at least ten days’ written notice of cancellation in the event of the non-payment of premium). The Tenant may carry any required insurance under a blanket policy if that policy complies with the requirements of this Lease.
6. Events of Default
The "Default Incidents" provision enumerates actions that represent violations of your lease. Common incidents encompass overdue rent payments, grappling with insolvency, or neglecting adherence to the lease conditions. Familiarize yourself with this segment and keep clear of these missteps to foster a harmonious rapport with your landlord and to operate your enterprise seamlessly.
The following events will be deemed to be Events of Default by the Tenant under this Lease:
(1) The Tenant fails to pay any installment of the Rent hereby reserved when due, or any other payment or reimbursement to the Landlord required under this Lease when due, and such failure continues for a period of 30 days after the Tenant’s receipt of written notice of such nonpayment;
(2) The Tenant becomes insolvent, or makes a transfer in fraud of creditors, or makes an assignment for the benefit of creditors;
(3) The Tenant files a bankruptcy petition or Tenant is adjudged bankrupt or insolvent in proceedings filed against the Tenant;
(4) A receiver or trustee is appointed for all or substantially all of the assets of the Tenant; and
(5) The Tenant fails to comply with any term, provision, or covenant of this Lease (other than the foregoing in this section 18), and does not cure such failure within 30 days after written notice thereof to the Tenant, or such longer period as may be necessary to cure such default provided the Tenant has promptly commenced curing such default and is diligently proceeding to obtain such cure.
7. Holdover
The "Holdover" provision addresses circumstances where you remain beyond your lease's expiry. If you fail to vacate by the conclusion of your lease duration, you'll be liable for 125% of the standard rent for each month you persist. Ascertain your comprehension of the consequences of overstaying and prepare an appropriate departure plan.
If the Tenant holds over after the expiration of the Term and does not surrender the Premises prior to the expiration of the Term, then for each such month that the Tenant is holding over, the Tenant shall pay to Landlord 125% of the Rent due under this Lease for each month.
What happens when a Commercial Lease Agreement expires?
Upon concluding a commercial lease contract, multiple outcomes can occur. I found remarkable resources that describe potential occurrences:
- Extend or Discontinue: Commercial occupants ought to determine whether to extend or discontinue their lease contract significantly before its termination. Commencing this procedure 6 to 12 months beforehand is perceived as a good norm.
- Conversion to Month-to-Month: If the initial lease doesn't get extended or a fresh lease isn't agreed upon, the occupant might have the option to shift into a month-to-month tenancy, contingent on the landlord's consent.
- Premises Occupied by Landlord: Occasionally, when a commercial lease concludes, the landlord might opt to utilize the property personally, either for residential or business intentions.
- Likelihood of Legal Proceedings: If complications arise towards the lease end, primarily if a tenant has habitually postponed rent payments or disregarded the lease terms, the lease conclusion can potentially escalate to legal proceedings.
What are the penalties for breaking Commercial Lease Agreements?
Indeed, the fines for breaching a commercial lease contract may fluctuate, however, there are a few standard penalties:
- Outstanding Rent: Generally one of the key penalties for breaking a commercial lease is the tenant being held accountable for the remaining rent due as per the lease term, even post-property evacuation.
- Notification Period: The majority of commercial landlords require a notification period spanning from 30, 60, to 90 days when the tenant intends to break the lease.
- Severance Charges and Extra Expenses: Based on the stipulations in the lease agreement, commercial leases may impose termination charges and may hold the tenant liable for any promotional costs incurred for securing a new tenant as well as possible cleaning expenses.
- Legal Implications: Depending on the situation and the extent of the lease violation, if internal resolution mechanisms within the lease fully utilized, the issue may progress to legal recourse or result in a court dispute.
Given that the specifics of penalties could diversify depending on the lease agreement, it's paramount to meticulously study the lease document to comprehend the precise terms and stipulations tied to premature termination.