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A New York commercial lease agreement is a legally enforceable agreement between a business entity and a landlord. In exchange for rent, it permits a company to occupy office, retail, or industrial spaces. The maintenance costs for commercial property are typically higher, making this lease agreement more complex than a residential lease. Furthermore, the agreement will be quite similar to one between a tenant and a landlord for residential property; however, it may have additional provisions that will allow for the conduct of business in the unit. A guarantee is frequently used in this kind of agreement, particularly if the tenant has a spotty credit history.

New York Leases

An arrangement for the rental of office, retail, or industrial space by a landlord to a tenant is known as a commercial lease in New York. Contrary to residential leases, commercial leases typically have options for renewal at agreed-upon rents. The contract specifies all the terms and conditions of the lease, including the security deposit, rent amount, lease term, opportunity to renew, and more. Once both parties have signed it, it becomes legally enforceable. On a rental application, the landlord would often ask for the latest two years' worth of profit and loss records, tax returns, and the credit history of the principal owner if the tenant is a business entity.

Landlord-Tenant Laws

  • There is a good guy guarantee in New York that is created for small businesses. In the event that a business fails, this will enable the renter to leave the premises before the lease expires. The lessee must give the landlord notice that they want to leave; however, the landlord is not allowed to sue the tenant for any overdue rent or fees.
  • The owner of the property is required to inform the prospective renter if the building was built before 1978. Moreover, the establishment's walls may contain lead-based paint, which could be harmful to the health of those who spend a lot of time working there.
  • There may be additional costs for the unit that the tenant is responsible for paying, based on the type of commercial lease agreement that is signed. Ensure that the rental agreement addresses all of these issues, which may include property taxes, utilities, insurance, and more.
  • When a tenant leases commercial property in the state, they almost certainly need parking for their clients and staff. Parking should be provided in the commercial lease agreement if the landlord is able to offer it to the tenant.

Types of Leases

The types of lease agreements you can find in New York include:

  • Apartment lease agreement
  • Condominium lease agreement
  • Commercial lease agreement
  • Month-to-month lease agreement
  • Rent-to-own lease agreement
  • Real Estate Board of New York lease agreement
  • Roommate lease agreement
  • Standard lease agreement
  • Single-family home lease agreement
  • Sublease agreement

What to Include

Option to Renew

Just like residential leases, tenants need to know about renewal options. In order for a lessee to know what to anticipate when the lease's initial term expires, it is crucial to include this information in the agreement provided to them. Most of the time, the tenant will be able to extend their lease with the landlord; however, if they do, there will potentially be an increase in monthly rent payments. Other fees that were part of the initial lease agreement may also be included in the new rental agreement.

Improvements to the Property

This section can be used to outline all the modifications and enhancements that should be made to the property, either now or in the future. It will include information on how to have these modifications to the unit approved and whether or not the landlord would cover the costs. The majority of rental agreements state that any improvements to the rented property must be approved by the landlord. Furthermore, the tenant may be given an initial build-out period by the landlord so they can design a business space that works for them. Normally, at this time, there will be no rent due; however, the tenant is still responsible for paying for the build-out.

Additional Information to Include

A few other important factors that need to be on a New York commercial lease agreement include:

  • Rules that need to be followed in the building's common areas
  • The condition of the building as well as any work the landlord needs to do before the new tenant occupies the space
  • Any penalties to the tenant regarding unpaid rent as well as the date on which fees will be added
  • Whether subletting and assigning the rental unit is allowed
  • Additional terms such as city municipal codes and restrictions that need to be adhered to

Disclosures

When a landlord drafts a lease of this nature, it is crucial that all applicable state disclosures are included with the documentation, reviewed by both parties, and thoroughly understood.

Good Guy Guarantee

This guarantee is primarily intended for small firms. It is a personal guarantee that permits the tenant to leave the property before the lease term is up in the event that the tenant's business fails since a small business might not have assets that the landlord can seize if the contract is broken. The landlord must be given advance notice; however, if the renter is a "good guy" and vacates the premises, the landlord won't pursue the tenant's personal affairs to recover the remaining rent owing after the date the property is returned to the landlord. Rather than going through a lengthy eviction process to acquire the property back, it can then be rented out again.

Use of Premise

It is crucial to include the objective of the business on a lease agreement when it is created for commercial use. The first disclosure should be carefully reviewed because it defines the office space and ensures that everything done on the land is recorded. It is a breach of the contract if any other business, whether legitimate or not, is conducted in the unit. The renter could want a more thorough justification to ensure that sales are not restricted, but the landlord might need to keep the use of the commercial unit as limited as possible. This prevents the landlord from being held accountable in court if zoning laws or other requirements are not followed.

Food Use Rider

There are numerous food service regulations that the tenant must follow if their business involves serving food or beverages. Ensure that the lease is accompanied by a copy of the New York state statutes so that the potential tenant can read them all and ensure that they are thoroughly understood. Any infraction of the law regarding food service in the state of New York constitutes a breach of contract and may result in the termination of the lease.

Lead Paint Disclaimer

Any building constructed before 1978 is required to notify the occupants that there may be a problem that they might have to deal with. The tenant must be aware of this before signing the lease because it may pose a risk to any people who visit the commercial space.

Build Your Own

You can download a sample commercial lease agreement from DoorLoop if you don't have time to draw one up yourself. The template is available for download in Word and PDF formats. Additionally, the document can also be modified to meet your specific requirements. Select "Commercial Lease Agreements" from the drop-down menu on the page, then select the free form that best suits your needs.

Write Your Own

Paying rent isn't the only thing to consider when thinking of a rental agreement. A commercial rental agreement will differ based on the state in which you reside. You need to be aware of certain laws specific to New York. It's crucial to remember that property owners and tenants must both be protected by a legally enforceable document. An outline of the format for these commercial leases is provided below:

Party Information

The date the lease becomes effective and the names of both parties should be shown at the top of the form. This will include the parties' contact information, including names, phone numbers, and addresses, for both the tenant and the landlord. The property that is being rented should be described in this part, along with the complete address. This should also provide the floor level on which the unit is located as well as the name of the building.

Lease Term

The dates the lease will be in force as well as the length of the lease must be specified in this section. This section should also include the renewal terms so that both parties are aware of what to expect when the time comes to renew the lease. Normally, if the tenant wants to renew the lease, they must provide the landlord with at least 90 days' notice. Additionally, the monthly rent payment, as well as the annual rent increase for the property, must be specified here. This part should also include information on the date that the rental payment is due as well as the security deposit that will be held in case of any damages. Furthermore, this section must include the business's operation hours and the time the tenant will be on the property. This will make it easier for the landlord to determine the ideal time to get in touch with the tenant so that they don't disturb operations while clients are present.

Alterations, Repairs, and Improvements

Even though this kind of work might be necessary while the tenant is occupying the space, as long as the tenant obtains the landlord's permission to carry it out, there shouldn't be any problems. Some landlords may even pay for the improvements or allow the tenant to add them to negotiate a lower monthly rent payment. This section must include all information concerning this type of work that the lessee needs to know.

Utilities and Expenses

Usually, the renter is responsible for paying the utilities, while the landlord will take care of the building's property taxes and insurance. This will apply to the phone, gas, electric, sewage, and water systems. Furthermore, this portion of the lease contract must explicitly state and agree on any utility costs that the landlord will bear.

Parking Terms

Most tenants will be concerned about parking, unless the building they are renting is in New York City, in which case they won't. In addition to giving the landlord the option to charge rent for the use of the spaces, this section might specify how many spaces are required for the company. It will be added to the rent cost each month and is payable on the first of every month.

Signatures

After reading and agreeing to everything else in the formal document, both parties need to date and sign the contract at the bottom. The names of the parties should also be printed in a designated place. This area will also need to have the details and signature of the guarantor if one is needed for the rental. Their name, date, social security number, address, and signature are typically required.

The Bottom Line

Renting a commercial space is not as easy as it seems. Although drafting a rental contract may seem challenging, by carefully reading each condition, you can assure that you will end up with a document that both parties will accept and that will help you prevent issues. Running a rental business requires creating thorough lease agreements; therefore, if this is your first time drafting one, it is a good idea to use software such as DoorLoop to speed up the process. When it comes to drafting a professional and simple New York commercial lease agreement, we have you covered!

FAQs

Do You Need to Notarize a New York Commercial Rental Agreement?

Commercial lease agreements must be signed by all parties, including a guarantor (if applicable), even though a notarization is not required in New York for it to be legally binding.

Is a Commercial Rental Agreement More Complex Than a Residential Rental Agreement?

Yes, it is. The main reason is that, in order for the tenant to properly run their office space, commercial buildings generally have more state regulations. This involves screenings for disabilities, safety precautions, and other things.

Does An Attorney Have to Draw Up the Agreement?

No, a lawyer is not necessary when drafting a rental agreement. In the event that the agreement is broken, you can hire a lawyer to represent you and defend your legal rights. If you choose to take this route, be aware that you will incur legal fees.

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David Bitton

David is the co-founder & CMO of DoorLoop, a best-selling author, legal CLE speaker, and real estate investor. When he's not hanging with his three children, he's writing articles here!