Minnesota Commercial Lease Agreement Template
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A Minnesota Commercial Lease Agreement is fundamentally a joint covenant between you and your property owner. This concord authorizes you the privilege to utilize a domicile for your enterprise activities, for a decided duration and cost. It's refined to suit the unique undertakings your venture endeavors to execute therein. Ascertain to comprehend every segment of it prior to affixing your signature.
What are the related laws for Commercial Lease Agreements in Minnesota?
Chapter 504B, Section 135 of Minnesota Statutes specifically governs lease-related concerns. This encompasses various measures, descriptions, and terms that dictate the inception, amendment, performance, and violation of leasing contracts.
Highlighted in some segments of the section:
- Section 504B.135 Subdivision 1 outlines descriptions, enumerating numerous terms connected to leasing contracts and their corresponding definitions.
- Section 504B.195 handles risk of loss scenarios, detailing instances and conditions when the risk of loss from property transpires.
- Section 504B.181 Subdivision 2 sets the statute of limitations for resolving lease contract issues. It cites that involved parties can lessen the limitations period to no less than a single year.
Laws — Chapter 336, Article 1, Part 2: Minnesota Uniform Commercial Code
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How to write a Commercial Lease Agreement
As an entrepreneur, the intricate legal terminology entailed might seem intimidating. Nonetheless, armed with an unambiguous diagram and the correct advisement, you can confidently compose your lease accords. Let's delve into the core elements of a business lease agreement, as well as the ways to customize it to your requirements - envision this as your genial, transparent manual to traversing the landscape of commercial leases.
1. Permitted Uses
The "Permitted Uses" condition informs you about the legitimate ways to exploit the leased real estate. It distinctly stipulates the permitted operations. These encompass industrial applications, clerical tasks, storage, allocation, and generation and dissemination of goods.
It's fundamental to correctly itemize all your planned company operations here. This transparency aids in dodging potential juridical complications and results in effective allocation of resources. Volunteer every detail to prevent unexpected developments. This comprehension maintains your enterprise on course.
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 concerns the lease duration and prolongations. It commences on the Initiation Date and concludes on the Termination Date. You can lengthen it for two additional two-year terms under identical stipulations, although rent might escalate. Notify the property owner in writing 30 days ahead of term conclusion to prolong.
(b) "Term" encompasses your preliminary lease period and any subsequent extensions.
Transparent lease conditions are vital for commercial strategizing and functions and for potential elongations.
(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 "Upkeep and Restoration" term illuminates who is in charge of repair tasks. It encompasses both internal and external dilemmas, such as defective piping or impaired masonry. The expense is borne by the landlord, not you.
In the event of a repair not being resolved promptly, you can coordinate repair operations and deduct the cost from your rent. Make sure to record these instances for prospective consideration. This condition is essential, as it lays out repair duties and shields you against unforeseen costs.
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
"Modifications" delineates your entitlements to amend the leased area. You may enact changes without the proprietor's approval, but significant modifications fall under the realty owner's jurisdiction. You're encouraged to retrieve personal belongings such as racks or machinery provided it doesn't inflict damage on the establishment. Grasping this provision can circumvent disagreements and assist in tailoring your commerce configuration efficiently.
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" provision safeguards both lessee and lessor. As the tenant, you require property and liability coverage, designating the landlord as an auxiliary insured. The property owner handles insurance for damages to the premises.
'Waivers of subrogation' restrain insurers from seeking reimbursement from the opposing party post-loss. Your insurance provider ought to inform the landlord 30 days prior to termination. Grasping these concepts fortifies your venture's fiscal security.
(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 "Instances of Breach" provision enumerates activities that are deemed violations of your lease. Habitual occurrences encompass neglecting rent disbursements, encountering financial instability, or not adhering to lease conditions. Acquaint yourself with this section and circumvent these obstacles to retain a harmonious rapport with your landlord and conduct your business seamlessly.
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 "Sustained Tenancy" term addresses scenarios where you persist past your lease period. If you don't vacate by the conclusion of your lease duration, you will compensate 125% of the customary rent for every sustained tenancy month. Ensure you comprehend the expenditure of persisting and devise your departure strategy prudently.
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, various outcomes may transpire. I discovered valuable resources that describe the likely consequences:
- Renewal or Termination: Enterprises should determine whether to renew or conclude their rental contract well before its termination. Commencing the process 6 to 12 months beforehand is deemed optimal practice.
- Switch to Month-to-Month: Should the initial lease not be renewed or a new agreement remain unsigned, the renter might transition to a month-to-month tenancy, contingent on the property owner's consent.
- Property Owner Assumes Tenancy: Occasionally, when a commercial lease ceases, the landlord may opt to inhabit the property, either for personal or professional use.
- Possibility of Legal Proceedings: Should complications arise towards the lease's end, such as the tenant's persistent failure to pay rent or adhere to the lease's terms, legal actions might ensue.
What are the penalties for breaking Commercial Lease Agreements?
Certainly, repercussions for terminating a commercial lease agreement can vary, but there are some frequent penalties:
- Residual Rent: A prevalent penalty for breaking a commercial lease involves the tenant being held accountable for the remaining rent due per the lease term, even post-vacating the property.
- Notification Duration: A majority of commercial landlords request a notice period, varying between 30, 60, or 90 days when the tenant opts to breach the lease.
- Termination Charges and Supplementary Expenses: Subject to the lease agreement's provisions, commercial leases may impose termination fees and assign responsibility to the tenant for advertising expenditures incurred to find a new tenant and potential sanitation costs.
- Judicial Ramifications: Based on the circumstances and the breach's nature, if conflict resolution mechanisms within the lease are depleted, the situation may advance to legal proceedings or culminate in a court dispute.
Given that specific penalties may diverge based on the rental contract, it's essential to meticulously examine the lease document to discern the precise stipulations regarding premature termination.