Colorado Commercial Lease Agreement Template
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A Colorado Commercial Lease Agreement is fundamentally a reciprocal contract between you and the property owner. This accord grants you the privilege to utilize a property for your business functions, for a pre-agreed duration and cost. It's customized to cater to the specific tasks your enterprise aspires to perform on that property. Be certain to grasp every segment of it before sealing the deal.
What are the related laws for Commercial Lease Agreements in Colorado?
The Colorado Revised Statutes under Title 4, Article 2A encompasses lease-related stipulations. This includes diverse processes, definitions, and regulations framing the formation, amendment, enforcement, and violation of lease agreements.
As outlined in a few sections of the article:
- Section 4-2A-103 presents definitions, enumerating various terms applicable to lease contracts and their corresponding explanations.
- Section 4-2A-219 governs risk of loss situations, detailing the instances and conditions under which the risk of loss from goods materializes.
- Section 4-2A-506 establishes the statute of limitations in handling lease contract disputes. It emphasizes 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, you could feel overwhelmed by the intricate legal terminology. Yet, with a clear action plan and appropriate guidance, you're fully capable of creating your lease agreement. Let's delve into the basics of a commercial lease agreement, and how you can adapt it to suit your requirements - treat this as your approachable, uncomplicated handbook for maneuvering through commercial leases, based on Colorado statutes.
1. Permitted Uses
The "Authorized Uses" portion informs you how to exploit the rented property according to Colorado laws. It distinctly defines permitted tasks. These encompass industrial operations, administrative work, storage, dispersal, and producing and distributing goods.
It's pivotal to precisely detail all your projected business activities here. This lucidity assists in bypassing potential legal complications and guarantees smooth managerial planning. Incorporate all pertinent to sidestep unforeseen discoveries. This knowledge keeps your enterprise goal-oriented.
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 refers to the lease duration and possible extensions, according to Colorado laws. It commences on the Effective Date and concludes on the Expiration Date. It can be prolonged for two additional two-year periods with the existing terms, although a rent increment may occur. Always submit a written notice to the landlord 30 days prior to the term ending to extend.
(b) "Term" encompasses your initial lease period along with any subsequent extensions.
Explicit lease terms play an essential role in business strategizing and operations, as well as in potential extensions.
(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 "Repairs and Maintenance" section simplifies who manages restorations within the Colorado laws. It encompasses both internal and external concerns, such as dysfunctional piping or impaired masonry. The expense is borne by the landlord, not you.
If a repair isn't promptly resolved, you have the ability to arrange restoration efforts and deduct it from your rent. Make sure to keep records of these occurrences for future considerations. This provision is essential, as it outlines restoration duties and shields you from unanticipated charges.
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
"Alterations" elaborates your entitlement to adapt the rented space under the Colorado laws. You're authorized to make adjustments without the landlord's approval, but substantial modifications become the landlord's ownership. You're welcome to displace personal items like racking or equipment, provided it leaves no harm to the premises. Comprehending this provision can avert disagreements and aid you in effectual configuration of your business operations.
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" section provides protection for both lessee and lessor in accordance to Colorado laws. As a lessee, you necessitate having property and liability coverage, designating the lessor as an additional insured. The lessor undertakes insurance for damage to the premises.
'Subrogation relinquishment' halts insurance providers from demanding compensation from the alternative party post loss. Your coverage provider should alert the lessor 30 days prior to cancellation. Comprehending these dimensions ensures the financial safety of your enterprise.
(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 "Defaults and Remedies" provision enumerates behaviors regarded as violations of your lease in compliance with Colorado laws. Common occurrences consist of rent payment delays, confronting financial distress, or disregarding lease stipulations. Stay vigilant of this segment and circumvent these obstacles to preserve a favorable relationship with your landlord and effectively 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 "Holdover" provision handles circumstances when you extend beyond your lease tenure in line with Colorado laws. If you fail to vacate by the closure of your lease term, you'll be accountable for 125% of the customary rent for each extra month. It's crucial that you comprehend the financial implications of overstaying and strategize your departure accordingly.
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 termination of a commercial lease agreement, various outcomes may arise. Consider these helpful insights on possible scenarios in line with Colorado laws:
- Renew or Terminate: Proactively determine whether to renew or end your lease well before its conclusion. It's wise to commence this process 6 to 12 months in advance.
- Shift to Month-to-Month: If the initial lease isn't extended or a new lease isn't established, you could transition to a month-to-month tenancy, granted the landlord consents.
- Landlord Assumes Possession: Occasionally, when a commercial lease concludes, the landlord may opt to inhabit the property, either for business or personal use.
- Legal Action Possibilities: If complications transpire near a lease's end, such as persistent rent payment delays or lease term neglect, the lease termination may result in legal action.
What are the penalties for breaking Commercial Lease Agreements?
Certainly, the repercussions for breaking a commercial lease agreement can differ, but you'll often encounter a few standard penalties according to Colorado laws:
- Remaining Rent: A common penalty for early lease termination is the tenant being responsible for the outstanding rent, even after leaving the premises.
- Notice Period: In most cases, commercial landlords require a notice period, typically between 30 and 90 days, when the tenant opts to break the lease.
- Termination Fees & Extra Costs: The lease agreement might specify termination fees and require the tenant to cover expenses like advertising for a new tenant or potential cleaning costs.
- Legal Outcomes: If lease provisions for settling disputes are insufficient, the issue could escalate to legal proceedings or result in a court dispute.
As penalty specifics can vary, it's essential to thoroughly examine the lease agreement to grasp the exact terms and conditions linked to early termination.