Pennsylvania Commercial Lease Agreement Template
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A Pennsylvania Commercial Lease Agreement is fundamentally a reciprocally binding covenant between you and your property owner. This accord grants you the privilege to utilize a property for your corporate activities, for a consented period and compensation. It's custom-fitted to the distinct operations your enterprise plans to execute at that location. Ascertain to comprehend each segment of it prior to affixing your signature.
What are the related laws for Commercial Lease Agreements in Pennsylvania?
Title 13, specifically Article 2A, of the Pennsylvania Commercial Code is dedicated to addressing leases. It encompasses a variety of processes, definitions, and provisions that oversee the formation, alteration, execution, and breach of lease agreements.
As highlighted in some sections of the article:
- Section 2A103 prescribes definitions, enumerating diverse terms associated with lease agreements and their corresponding meanings.
- Section 2A219 manages risk of loss situations, elaborating on when and under which conditions the risk of loss related to goods transpires.
- Section 2A506 establishes the statute of limitations for settling lease agreement disputes. It indicates that parties may shorten the limitations period to a minimum of one year.
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How to write a Commercial Lease Agreement
As an entrepreneur, the labyrinth of intricate legal language can be intimidating. Yet, armed with clarity and appropriate advice, you can assuredly compose your lease contract. Let's dive into the core elements of a commercial lease contract and how to adapt it to your requirements - think of this as your warm-hearted, uncomplicated guide through the maze of commercial leases.
1. Permitted Uses
The "Authorized Uses" provision instructs you on the appropriate utilization of the leased premises. It lucidly delineates allowed operations. These may encompass production activities, administrative tasks, warehousing, distribution, and manufacturing and dissemination of goods.
It's essential to precisely record all planned business operations in this section. This specificity helps circumvent potential legal challenges and ensures effective distribution of resources. Incorporate every nuance to preempt future unexpected circumstances. This insight keeps your enterprise 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 concerns the tenancy period and prolongations. It commences on the Inception Date and concludes on the Termination Date. You have the option to prolong it for two additional two-year intervals under identical terms, though the rent might escalate. To extend, serve a written notification to the property owner 30 days prior to the term's end.
(b) "Term" denotes both your initial lease span and any subsequent extensions.
Transparent lease terms are vital for business strategizing and functioning, as well as for prospective 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 "Repair and Maintenance" provision enlightens about who is responsible for mending tasks. It encompasses both internal and external complications, like defective pipe system or spoiled masonry. The expense rests on the property owner, not you.
If a repair isn't tackled promptly, you have the capability to arrange repair work and deduct it from your rent. It's crucial to archive these incidents for potential reference. This provision is critical as it outlines repair obligations and shelters you from unplanned 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
"Modifications" outlines your entitlements to amend the leased space. Changes can be made without the owner's approval, but substantial modifications become the property of the landlord. You're permitted to remove personal assets like shelving units or machinery provided it does not harm the premises. Grasping this clause can avert disagreements and assist you in formulating your business arrangement effectively.
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 safeguards both lessee and lessor. As the lessee, you must acquire property and liability coverage, labeling the landlord as a supplementary insured. The lessor manages insurance for damages to the premises.
'Waivers of subrogation' deter insurers from seeking compensation from the opposing party post-loss. Your insurance provider should inform the lessor 30 days preceding cancellation. Comprehending these terms fortifies your business financially.
(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 "Events of Default" provision itemizes actions deemed as breaches of your lease. Common events consist of neglecting rent payments, encountering insolvency, or not adhering to lease conditions. Familiarize yourself with this segment, circumventing these snags to sustain a harmonious relationship with your landlord and operate your business 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 highlights circumstances when you exceed your lease duration. Failing to vacate by the lease term's conclusion will result in a charge of 125% of the standard rent for every holdover month. Ascertain you comprehend the expense of overstaying and devise a fitting 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 a commercial lease agreement's expiration, different outcomes can arise. Here are potential scenarios to be aware of:
- Renew or Terminate: Before the lease expires, business tenants ought to consider whether to renew or end the agreement. It's a good idea to start this process 6 to 12 months ahead of time.
- Shift to Month-to-Month: If the initial lease isn't renewed or a new one isn't signed, tenants might transition to a month-to-month tenancy, with the landlord's consent.
- Landlord Occupies: Occasionally, when a commercial lease concludes, the landlord may decide to utilize the property for their own residential or business needs.
- Legal Action Possibility: If problems arise near the lease's end, such as chronic late rent payments or failure to comply with lease terms, legal action might result.
What are the penalties for breaking Commercial Lease Agreements?
Indeed, penalties ensuing from a commercial lease agreement breach can fluctuate, however, there are typically common repercussions:
- Outstanding Rent: A significant penalty for breaching a commercial lease often involves the tenant being accountable for the remaining rent due as per the lease term, even post-vacating the premises.
- Notice Period: Most commercial lessors expect a notice period spanning 30, 60, to 90 days when the tenant plans to break the lease.
- Termination Charges and Additional Expenses: Depending on the lease agreement's stipulations, commercial leases may impose termination charges and make the tenant answerable for any promotional costs for securing a new tenant and potential cleaning expenses.
- Legal Implications: Based on the circumstances and nature of the breach, if lease-governed grievance resolution mechanisms are exhausted, the issue may elevate to legal proceedings or end in a court dispute.
As penalties' particulars might differ based on the lease agreement, it's essential to thoroughly examine the lease contract to grasp the exact terms and conditions linked with early termination.