5 Essential Types of Lease Clauses

 June 16, 2022

By  Guy Gray

In the classic Christmas film, The Santa Claus, Tim Allen’s main character is obligated to become the new Saint Nick after he accidentally caused the original one’s demise. He found out about his new duties on a contract found on a card in Santa’s coat, which contained the following hard-to-read clause:

“‘In putting on the suit and entering the sleigh, the wearer waives any and all rights to any previous identity, real or implied, and fully accepts the duties and responsibilities of Santa Claus in perpetuity until such time that the wearer becomes unable to do so by either accident or design.”

Talk about needing to read the fine print! Similarly, commercial leases also contain important clauses you need to understand thoroughly. Let’s go over five of the most essential ones.

1. Renewal Options

Renewal terms are a common sight in commercial leases. These clauses contain information like critical dates for renewals, revised rates for contracts not renewed and what rights the tenant and landlord have when it comes to renewal options. If your leases contain this type of clause, it’s important to set up critical date reminders so you don’t miss the deadline for renewal negotiations.

2. Subletting

When tenants sublease a commercial space, the landlord doesn’t enjoy as much profits as if the tenant was leasing their own space. As such, this type of lease clause is worth considering to implement a fee for subletting, so you still benefit from these types of leases. That being said, you can also prohibit subletting and/or assigning leases.

3. Exclusivity

If your commercial building is a shopping center or facility with several tenants, you might want to consider an exclusivity clause to give your tenants peace of mind. These clauses will ensure that the tenant is the only one in their line of business at your property, helping eliminate conflict of interest and maintaining fairness for existing tenants. 

4. First Refusal

Another clause that benefits tenants while still helping your portfolio is a Right of First Refusal (ROFR). This basically means that if the property owner decides to sell the property, the tenant has first dibs on buying that property. If there are any existing offers, the tenants usually get the right to buy the property on similar terms.

5. Guarantees

Many tenants these days are worried about evictions, but a guarantee can reduce these worries by providing protections for both the tenant and landlord via a third-party intermediary. If your prospective tenants have credit issues or a history of financial issues, these would be good indicators that this clause is necessary.

If you’d like to learn more about leases clauses and how Quarem can help you better organize them, request a demo today.

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About the author 

Guy Gray

Guy Gray serves as Chief Operating Officer overseeing our technology and client services teams. He is responsible for guiding Quarem application development, networking and security, as well as new client implementations.

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