Renting a commercial property comes with laws and regulations that are governed by the Commercial Landlord & Tenant Act. The laws enacted exist to protect the rights of the tenant and the landlord in a commercial lease transaction. Commercial property arrangements tend to lean more favorably toward the landlord, but understanding how the law is written can help you to avoid problems as a commercial tenant.
Residential tenants have special coverage that states if repairs are needed on the property that the renter can withhold rent until the repairs are made, or can deduct the amount of the repairs from the rent. Commercial tenants do not have the same rights unless it is specifically stated in the commercial lease that the landlord and tenant both have to sign. It is imperative that you read the lease from beginning to end to check for the terms and conditions of the lease. Because commercial leases can be long and complex, tenants may want to consider having an attorney or real estate agent act on their behalf read and go over the lease with them.
The lease is required to contain terms and conditions, price and any special clauses for the tenant who is renting the building or space. Civil Code 1950.8 requires addresses "key money," which is when a lump sum amount of money is paid upfront by the tenant to rent the property. If "key money" is required, it must be stated in the lease. If "key money" is taken by the landlord, but it is not addressed in the lease then the charge is considered illegal and the tenant can sue the landlord for up to three times the amount that they paid.
Any work that the tenant does to add improvements to the property must be specified in the lease and should include diagrams. By law, any improvements or work paid for by the tenant must be done according to the code where the property is located and be completed by licensed contractors with permits. Any improvements or fixtures that are attached to the building become the property of the landlord even if the tenant paid for it, unless it is specifically outlined in the lease that the tenant can take the item or fixture upon leaving the property.
Defects and Repairs
Under the terms of a commercial lease, the landlord is responsible roof and exterior wall repairs. The tenant is responsible for everything else. If a repair that is the responsibility of the landlord is needed, the tenant must notify the landlord. The landlord has 30 days to start the repair, but the repair does not have to be complete within the 30-day period. If the defect causes damage to your business property, the landlord is not liable.
If it is month-to-month lease, the law requires the landlord to give the tenant a 60-day notice if the rent increase exceeds 10 percent of the current rent amount for the entire year. The law is written this way to allow tenants enough time to find a new location for their business if they cannot afford the rent after the rate increase.
The primary reason for a commercial tenant to be evicted is for not paying the rent. The Code of Civil Procedure Section 1161.1 allows the landlord to start eviction proceedings even if the tenant underpaid by even 20 percent. For example, if the rent amount is $1,200 and you pay $1,000 and owe $200, legally the landlord has the right to begin the eviction process after giving you a notice to pay. Commercial leases typically require a five to 10-day notice from the landlord to the tenant that the tenant is in violation of the lease for non-payment.