If you have entered into a lease agreement for commercial retail, warehouse, office space, or any other building or facility used for business purposes, you may find yourself in a situation where changed circumstances make one or more provisions of the original lease unworkable or undesirable.
When both parties to a commercial lease (the landlord and the tenant) agree to make changes, those changes can be accomplished through a document called a commercial lease amendment.
An amendment to a commercial lease agreement involves making changes to an existing lease agreement that is already in force. It may involve changing a single paragraph or section, or it may involve a more comprehensive overhaul, but the end result is that some of the language in the original lease has been modified in some way to reflect the wishes of the landlord and the tenant.
Sometimes, the word "addendum" is used incorrectly when someone means to say "amendment" to a commercial lease agreement. A lease addendum is a separate, stand-alone document that is provided with the original commercial lease agreement at the same time when it is originally signed. An addendum can be used to provide additional terms or clarification to information contained in the original lease, of which it is a part, right from the start.
Whether you are the landlord leasing space to a business or a tenant leasing that space, it is important that you understand the provisions of your existing lease before amending it.
If you simply make a change to one lease provision without reviewing the entire lease agreement, there is a possibility that you could inadvertently make a change that conflicts with another section of the lease. This could leave you at risk if you need to enforce the lease through the court system at a later date.
Read through the existing document with an eye toward identifying any clauses or sections that are dependent on or related to the section you want to amend, so you can make all needed amendments at the same time.
Before finalizing your commercial lease amendment in writing, you should negotiate the changes with the other party. The lease amendment will then simply memorialize your earlier conversations, documenting your intentions in writing. This can avoid the need to prepare multiple draft versions of your commercial lease amendment.
A commercial lease amendment can be used to make nearly any kinds of changes that the landlord and tenant agree on. Essentially, as long as what you are agreeing to is legal, your lease amendment can include it.
Having said that, most commercial lease amendments fall into the following five categories:
The most common use for commercial lease amendments is to extend the term of the lease. For example, if a lease allowed a business to occupy office space for a three-year period and the business wants to continue using the space at the end of the lease period, a commercial lease amendment could be prepared to extend the lease for another three-year period (or for any other time period the landlord and tenant negotiate together).
It is common for the cost of leasing the space to go up when the original term ends and is renegotiated for a new term. If the amount of rent will be changed for the new term, the lease amendment should provide the new, agreed-upon rent amount.
A lease amendment may also be used to change the terms of the renegotiated lease from a fixed-term lease to a periodic tenancy arrangement.
A tenant’s need for space can change over time as their business grows or struggles. Negotiating and signing a lease amendment can be a way to allow a business to expand to meet growing demand, or to scale back their operations and expenses, by reducing the amount of space they are renting (and the amount they are paying to rent that space).
When they are initially signed, commercial leases often include provisions addressing changes the tenant wants to be made, and that the landlord agrees to make, before the tenant takes possession of the space.
Over time, it is not uncommon for commercial real estate tenants to want to make changes or improvements to the space. This may be as simple as upgrading or updating paint and décor, or it could involve building a loading dock, changing wiring for improved Internet and telephone connections, adding individual offices or cubicles, or creating meeting spaces by partitioning a larger space. It may also become necessary to make improvements to comply with the Americans with Disabilities Act (ADA), modifying space to make it accessible to disabled workers or customers.
A commercial lease amendment can be used to identify the changes the landlord and tenant mutually agree on, and to identify who is responsible for paying the expenses of and arranging for the labor and materials for such improvements. An exhibit to the amendment outlining the proposed construction may make sense, depending on how significant the agreed-upon changes are.
If you are a tenant leasing space and you want to expand your operations or otherwise need extra space, you may have an interest in being able to lease space adjacent to you if the tenant using that space leaves.
A commercial lease amendment can be used to expand the terms of your lease when that space becomes available, so your new lease would essentially cover both your previous space and the adjacent space.
However, even if the tenant in the adjacent space is not vacating the property yet, the lease could still be amended to give you (or your tenant) the right of first refusal to lease that space if and when it becomes available.
An amendment can be used to change virtually any other provision of a commercial lease agreement. This may include:
When you have identified the provisions you want to change, delete, or add to your existing commercial lease agreement, it is time to make the changes by drafting your lease amendment.
The components of a commercial lease amendment should include the following provisions:
Each change you want to make to the existing lease should have its own section. The amendment to your existing commercial lease should explain those changes in clear and understandable language. If a provision is being deleted, or a new section or paragraph is being added, the amendment should provide the paragraph number(s) and title(s) for reference. If a section or paragraph is being changed, the amendment should include the language for the new paragraph in its entirety.
As with any kind of legal document, both parties to a commercial lease amendment need to have the legal authority to enter into a legal contract at the time they sign.
The landlord’s and tenant’s (or their authorized representatives') signatures will need to be witnessed by a notary public who should sign and affix his or her stamp or seal as applicable in the state where the document is being signed and notarized.
Amendments to existing commercial lease agreements are legal contracts, so it is important to understand what you are agreeing to and to be deliberate about the changes you are making. Commercial leases can be amended more than once, but it is a good idea to be thorough and as complete as possible to lessen the need to make additional amendments right away.
After your amendment has been signed, both the landlord and the tenant should retain copies for their records, attaching them to (or keeping them in the same place as) the original lease agreement.
State laws govern commercial leases. It is important to remember that your state may have specific disclosure requirements.
When a lease reflects the landlord's and the tenant's wishes regarding the use of commercial real estate and the terms and conditions for such use, both parties can benefit from the relationship.
Amending an existing lease by negotiating, preparing, reviewing, and executing a valid commercial lease amendment helps to protect both parties by documenting their intentions in writing.
LegalNature can help you with all of your legal form needs. Let us help you get started today. To learn more, view our commercial lease amendment help guide and then create your commercial lease amendment.
Can't find what you are looking for?
Contact us here.