South Dakota Commercial Lease Agreement Template
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A South Dakota Commercial Lease Agreement is fundamentally a reciprocal pact between you and your property owner. This accord entitles you to utilize a property for your business functions, for a mutually agreed duration and fee. It's designed to accommodate the specific endeavors your enterprise plans to execute on the premises. Be certain to comprehend every aspect of it before affixing your signature.
What are the related laws for Commercial Lease Agreements in South Dakota?
Title 43, Chapter 32 of the South Dakota Codified Laws specifically addresses leases. This encompasses diverse methods, definitions, and conditions that govern the establishment, amendment, operation, and violation of lease contracts.
As outlined in some portions of the chapter:
- Section 43-32-3 gives definitions, itemizing various terms linked to lease contracts and their respective interpretations.
- Section 43-32-6 manages risk of loss circumstances, providing details about when and under which situations the risk of loss from goods transpires.
- Section 43-32-13 establishes the statute of limitations in resolving lease contract issues. It indicates that the parties can shorten the limitations duration to not less than one year.
Laws — Title 57A, Chapter 2A: South Dakota Uniform Commercial Code
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How to write a Commercial Lease Agreement
As an enterprise proprietor, you might find yourself overwhelmed by the intricate legal terminology involved. Nevertheless, with a transparent plan and accurate counsel, you are able to competently formulate your lease agreement. Let's delve into the fundamentals of a commercial lease contract, and how to customize it to your requirements - regard this as your amiable, unambiguous manual to traversing the landscape of commercial leases.
1. Permitted Uses
The "Approved Functions" clause directs you on the utilization of the rented premises. It provides a transparent definition of the permitted operations. This incorporates industrial operations, administrative tasks, storage, allocation, and the production and delivery of goods.
It's vital to precisely enumerate all your impending commercial operations in this section. This precision aids circumventing possible legal hiccups and assures effective resource distribution. Enter every attribute to dodge unexpected future complications. This comprehension preserves your business on schedule.
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 prolongations. It commences on the Commencement Date and terminates on the Cessation Date. You have the capability to prolong it for two further two-year intervals under identical prerequisites, but rent might augment. Advise your property owner in written form 30 days before lease end to prolong.
(b) "Duration" denotes both your primary lease term and any prolongations.
Transparent lease durations are vital for corporate planning and functioning, as well as probable 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 "Restoration and Upkeep" provision elucidates who undertakes repairs. It encompasses both interior and exterior matters, such as malfunctioning piping or impaired masonry. The expenses are shouldered by the property owner, not you.
If a restoration isn't executed promptly, you can arrange repair efforts and deduct it from your lease payment. Consistently chronicle these occurrences for prospective reference. This provision is critical, as it stipulates repair duties and safeguards you from unforeseen outlays.
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
"Adjustments" delineates your privileges to alter the leased area. You can implement changes without landlord approval, but significant adjustments become the landlord's property. Feel at ease to eliminate personal assets such as shelving or equipment as long as it doesn't cause harm to the premises. Enlightenment of this provision can circumvent disagreements and aid you in designing your business configuration 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" stipulation secures both lessee and lessor. As the lessee, you necessitate property and liability insurance, designating the landlord as supplementary insured. The landlord provides insurance for damages to the premises.
'Waivers of subrogation' prevent insurance providers from pursuing the opposing party post-loss. Your insurance company ought to apprise the property owner 30 days before discontinuation. Comprehending these conditions shields your venture 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 "Incidents of Default" provision catalogs acts that are regarded as infringements of your lease. Common incidents encompass neglected rent remittances, dealing with insolvency, or disregarding lease stipulations. Stay cognizant of this part and evade these snags to sustain a commendable rapport with your property owner and seamlessly manage your enterprise.
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 "Overstay" provision addresses scenarios when you extend your lease beyond its term. If you don't vacate by your lease term's conclusion, you're liable for 125% of the usual rent for each overstay month. Be sure to grasp the expense of overstaying and strategize your departure plan suitably.
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, numerous outcomes are possible. Some enlightening references encapsulate the potential scenarios:
- Extend or Conclude: For business lessees, it's wise to decide whether to extend or conclude their lease agreement long before its end. Starting this procedure 6 to 12 months ahead is deemed responsible.
- Shift to Month-to-Month: If the original lease isn't extended or a new lease isn't transacted, the lessee might transition into a month-to-month occupancy, assuming the lessor consents.
- Lessor Assumes Occupancy: At times, when a commercial lease concludes, the lessor might opt to inhabit the property personally, either for residential or business pursuits.
- Possibility of Legal Proceedings: If disputes arise toward the end of a lease—for instance, if a lessee has habitually postponed rent payments or neglected to comply with lease terms—the lease's conclusion might result in legal proceedings.
What are the penalties for breaking Commercial Lease Agreements?
Certainly, repercussions for breaching a commercial lease agreement differ; however, some typical penalties exist:
- Outstanding Rent: A primary penalty for breaking a commercial lease often requires the tenant to be accountable for the residual rent due, based on the lease term, even post-vacating the premises.
- Notification Period: Most commercial property owners require a notice period between 30, 60, to 90 days when a tenant decides to terminate the lease.
- Termination Charges and Extra Expenses: Commercial leases may impose termination fees, and tenants might be held responsible for advertising costs for locating a new tenant and possible cleaning charges, depending on the lease agreement's stipulations.
- Legal Ramifications: Depending on the nature and context of the breach, if internal dispute resolution methods within the lease are inadequate, the situation may escalate to legal proceedings or result in a court dispute.
As penalty details may vary according to the lease agreement, it is vital to meticulously examine the lease document to comprehend the specifics of early termination.