Commercial leases are legally-binding documents that outline all the rules and regulations that the landlord and tenant must follow to achieve a healthy rental relationship. In essence, a commercial lease will vary from a residential lease since the commercial one involves a few additional clauses, including the advertisement, parking rules, and other things that all parties involved should know.
Thankfully, the lease requirements for a commercial property in Michigan aren't complicated to understand. If you want to know everything about the Michigan commercial lease agreement and how it differs from a regular residential lease, this page is for you.
We will outline all of the details surrounding this lease type, so if you're planning on leasing your property to a new tenant, make sure you read until the end of this page.
Michigan Lease Agreements
Before diving deep into the specifics of commercial leases in Michigan, let's cover the three basic types of leases you can consider for your property contract. Keep in mind that you can decide to use any of these three options for your property, so make sure to review each one to determine what the best option for you is.
- Gross Lease: In gross leases, the landlord will be responsible for paying all of the expenses surrounding the property, including property taxes, area expenses, and insurance. On the other hand, the tenant will only be responsible for paying monthly rent.
- Triple Net Lease: Here, the tenant is responsible for paying all of the expenses related to the business property, including insurance, taxes, and other expenses. This lease type is considered landlord-friendly.
- Modified Gross Lease: In this case, the landlord and tenant can come to an agreement regarding who will be paying for each of the provisions regarding the business property. This lease type is considered an option that benefits both the landlord and tenant.
Write Your Own
The following section will give you all of the provisions all parties involved in the contract must consider to have a healthy rental relationship. Considering that this is a legally-binding document, you must ensure that it includes everything you want and need for your property.
As mentioned before, lease agreements in Michigan aren't too complicated, so you have more freedom regarding including your own provisions.
Introduction | Primary Factors
In this first step, the landlord must include basic information regarding the rental space, such as the legal names of the parties involved in the document, the address of the building, and the lease term dates.
Description of the Commercial Property
Describe the rental space, particularly its square footage, the type of commercial space it is, and what utilities it has at the tenant's disposal.
Use of Premises
Here, the landlord and tenant will come to an agreement regarding how the tenant will use the space for their business activities.
Type of Lease
State the type of lease you decided to use for your rental space.
The following section outlines all the responsibilities that the tenant has to comply with to ensure the proper functioning of the space, although some of these tasks could be negotiated with the landlord. Some of these building requirements include maintenance, cleaning sessions, and others.
Landlords and tenants can come to an agreement regarding who will cover the costs of certain things, including the following:
Rent, Security Deposit, and Renewal
Base Rent Amount
According to Michigan law, every tenant must pay rent to occupy the building for their business activities. Landlords must include information regarding the amount of rent the tenant has to pay, as well as the due date for the payments.
If there are any late fees the landlord wants to discuss, they may want to include that in the document too.
Default and Possession
In case the tenants fail to cover rent payments within a specified period, there will be consequences. The landlord must include these consequences in the lease agreement document.
Landlords may allow the tenant to renew the commercial lease once the term ends. In this case, the landlord must include all of the conditions that the tenant must comply with.
A security deposit gets paid by the tenant so that the landlord can cover any excessive damage caused to the rental space. In case this doesn't happen, the tenant can get the deposit paid back once the lease ends. Include a clause that outlines the amount of the deposit, how the money will be used, and where the money will be saved.
Licenses and Permits
Every Michigan commercial business must comply with the law to operate in the state. In this sense, the tenant must have the required licenses and permits at every moment.
On the other hand, if the tenants want to make any new construction or renovation to the business space, they must consult the landlords first. Landlords may also include a clause that states the conditions for a new construction project.
These are other factors that should always be present in your commercial lease agreement:
- Right of Entry
- Indemnification and Bankruptcy Statements
- Attorney's Fees
On the other hand, these are clauses that aren't strictly necessary for your commercial lease agreement, but you may include them if you consider them appropriate:
- Pet Policies
- Smoking Policies
- Advertising Policies
- Sign Placements
Relocation and Expansion
A common commercial lease clause in Michigan allows the landlord to relocate the tenant to another space within the building. However, it's vital to note that landlords are typically required to pay for all the fees of relocating the tenant since that could pose a problem for their business and its customers.
Most property owners allow the tenant to negotiate the terms of relocations before starting the commercial lease.
Here, the tenant may request an exclusive use provision, which states that the landlord may not rent a space to another tenant that has a business that may be competitive with the current tenant's business. While the landlord may accept or reject this provision, they may also decide to offer an exclusive deal to include this provision.
Property owners may designate specific parking spots for the tenant. In this case, the tenant must provide a list with all of the license numbers for the cars and employees working for the property.
Damage to Premises / Surrender of Premises
Tenants are required to provide the building with all the necessary repairs to cover excessive wear and tear.
On the other hand, tenants must deliver possession of the building once the term ends.
Property owners in Michigan can terminate the commercial lease immediately if one of the following things happens:
- Nonpayment of rent
- Criminal activity in the building
- Breaching the terms of the agreements
Although it's not mandatory, it's recommended for owners to demand credit applications for the unit; this is to ensure that, if the tenant doesn't make any profits with their work, they can still cover rental payments and other items' costs.
If the rental unit was built before 1978, owners are required by law to include a clause that states that the unit may have lead paint, which can be hazardous to pregnant women and children.
Those who find it difficult to draft a commercial lease themselves may make things easier by downloading one of our templates. You can download a commercial lease form from our website in either Word or PDF format.
On the other hand, if you want to add any particular arrangement to the agreements, there's also a customization option for you to use. Go into the "Commercial Lease Agreements" menu on our website, and download the document for retail, office, or industrial spaces that best suits your needs.
Michigan law regarding a commercial arrangement isn't that complicated to understand. Generally speaking, you must ensure that each party is familiarized with the arrangement so that they can avoid legal problems in the future.
As long as the tenant and their employees follow the rules, and the owner ensures that the tenant's rights are covered, then they will likely have a much better relationship during the lease. Consider downloading a free template today, and customize it to fit the needs of every party involved in the arrangement!
Do Commercial Leases in Michigan Need to Be Notarized?
It's not necessary. Typically, one of the parties may request to have the document signed and notarized, but it's not required by Michigan laws.
Does a Michigan Commercial Lease Need to Be in Writing?
The Statute of Frauds requires all leases of over one year to be written and signed by each party. On the other hand, if the lease if a year or less, this isn't necessary.
Why Is a Commercial Lease Different from a Residential Lease?
They're different because commercial leases involve more clauses, payment requirements, and other additional factors that each party must agree with before starting the contract.