Hawaii Commercial Lease Agreement Template
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A Hawaii Commercial Lease Agreement in essence functions as a reciprocal pact between you and your property owner. This accord entitles you to utilize a property for your commerce ventures, for a consented period and fee. It's crafted to align with the specific operations your enterprise plans to perform at the site. Ensure you comprehend each aspect of it prior to affixing your signature.
What are the related laws for Commercial Lease Agreements in Hawaii?
Title 27, Chapter 490, Article 2A of the Hawaii Uniform Commercial Code specifically addresses leases. This encompasses a variety of procedures, definitions, and provisions governing the creation, alteration, execution, and violation of lease contracts.
As highlighted in certain sections of the article:
- Section 27-490-2A-103 provides definitions, enumerating numerous terms pertinent to lease contracts and their corresponding interpretations.
- Section 27-490-2A-219 deals with risk of loss situations, outlining when and under which circumstances the risk of loss from goods materializes.
- Section 27-490-2A-506 establishes the statute of limitations for resolving lease contract disputes. It states that parties can shorten the limitations period to a minimum of one year.
Laws — Title 27, Chapter 490, Article 2A: Hawaii Uniform Commercial Code
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Read on to learn more about Hawaii Commercial Lease Agreement, including:
How to write a Commercial Lease Agreement
As an entrepreneur, you may be apprehensive about the intricate legal terminology that often comes with leasing property. Fret not! Armed with a coherent plan and the proper direction, you'll be able to skillfully put together your lease agreement. Together, let's delve into the core components of a commercial lease contract and learn how to customize it to suit your requirements—think of this as your cordial, plain-spoken compass to the realm of commercial leasing in Hawaii.
1. Permitted Uses
The "Authorized Uses" provision conveys how the leased property is to be used. It concisely highlights permissible operations, such as manufacturing activities, administrative tasks, storage, dispersion, and assembling and disbursement of goods.
Getting all your projected business operations down to a tee in this clause is vital. Such lucidity wards off potential legal mishaps and guarantees optimal use of resources. Be sure to capture every nuance to steer clear of unexpected hiccups later. This awareness helps maintain your business on a steady course.
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 covers the lease duration and possible extensions. It commences on the Effective Date and concludes on the Expiration Date. Feel free to prolong it for two additional two-year intervals under identical terms; however, rent might rise. To extend, kindly inform the landlord in writing 30 days prior to the term's end.
(b) "Term" encompasses your original lease period and any subsequent extensions.
Transparent lease parameters are invaluable for shaping your business plans and day-to-day activities, along with potential elongations.
(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 "Maintenance and Repairs" provision identifies the person accountable for fixing issues. It takes into account both internal and external complications, such as problematic pipework or harm to masonry. The expense is borne by the landlord, not you.
Suppose a needed fix is not handled promptly; in that case, you are permitted to arrange for the repair work and deducting it from your lease payment. Make it a habit to keep a record of these occurrences for future recall. This provision is crucial, as it establishes maintenance duties and safeguards you from unforeseen costs.
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
The clause on "Modifications" lays out your prerogatives for adapting the leased premises. Without needing the landlord's approval, alterations can be effected, but substantive transformations become the landlord's possession. You're allowed to extricate items of personal property such as shelving units or equipment given it does not inflict harm on the premises. Comprehending this term can head off disagreements and assist you in designing your business environment 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" stipulation secures both lessee and lessor. As the lessee, it's necessary for you to hold property and liability coverage, designating the lessor as an additional insured. The lessor takes care of insurance for any harm sustained by the property.
'Subrogation waivers' inhibit insurance providers from suing the opposing party following a loss. Your insurance provider must inform the lessor 30 days prior to policy dissolution. Grasping these conditions shields your business from financial setbacks.
(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.”
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(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 "Conditions of Default" stipulation outlines conducts that are perceived as infringements of your lease agreement. Common occurrences encompass neglecting rent disbursements, encountering bankruptcy, or not complying with lease obligations. Stay cognizant of this segment and sidestep these hurdles to conserve a favorable rapport with your lessor and facilitate seamless business operations.
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 instances where you remain in your leased premises beyond the agreed period. Failing to vacate the property by your lease's conclusion results in a charge of 125% of your usual rent for every holdover month. Spare time to grasp the additional expenses incurred by overstaying and accordingly outline an exit approach.
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 the expiration of a commercial lease agreement, various outcomes can materialize. I discovered some valuable sources that detail these potential outcomes:
- Choose to Renew or Terminate: Business lessees should determine if they wish to extend or terminate their lease well in advance of its expiration. Initiating this decision 6 to 12 months ahead is regarded as a best practice.
- Switch to Month-to-Month: In the event the initial lease isn't prolonged or a new one isn't executed, tenants could transition to a month-to-month agreement, assuming the lessor consents.
- Lessor Assumes Occupancy: In certain situations, following a commercial lease's conclusion, the landlord may decide to take over the property for personal residential or business use.
- Possibility of Legal Proceedings: Should disputes arise surrounding the end of a lease, such as regular rent payment delays or non-compliance with lease conditions, termination may culminate in legal action.
What are the penalties for breaking Commercial Lease Agreements?
Certainly, the consequences for breaching a commercial lease agreement can differ, yet there are a few typical repercussions:
- Outstanding Rent: One of the primary repercussions for terminating a commercial lease prematurely is that the lessee remains accountable for the remaining rent due per the lease period, even post vacating the premises.
- Notification Period: A majority of commercial lessors necessitate a notification period spanning from 30, 60, to 90 days when the lessee opts to end the lease.
- Termination Charges and Extra Expenses: Contingent on the conditions stipulated in the lease agreement, commercial leases may impose termination penalties, along with holding the lessee culpable for any incurred advertising expenses associated with procuring a substitute tenant and potential sanitation costs.
- Judicial Repercussions: Depending on the situation and nature of the infraction, if the dispute resolution methods outlined in the lease fail, the matter may escalate to legal proceedings or result in a courtroom dispute.
As the specifics of penalties might alter according to the lease agreement, it's crucial to scrupulously examine the lease contract to grasp the precise terms and conditions implicated in premature contract termination.