COMMERCIAL LEASE AGREEMENT
(California)
[// GUIDANCE: This template is drafted for use in California commercial real estate transactions. All bracketed items require client-specific input or deletion before execution.]
TABLE OF CONTENTS
- Document Header
- Definitions
- Lease of Premises; Term
- Rent; Additional Charges; Security Deposit
- Use of Premises; Compliance With Laws
- Alterations; Maintenance and Repairs
- Assignment and Subletting
- Insurance; Waiver of Subrogation
- Indemnification; Limitation of Liability
- Environmental Matters
- Defaults; Remedies
- Condemnation; Casualty
- Dispute Resolution
- General Provisions
- Execution Block
1. DOCUMENT HEADER
1.1 Parties.
This Commercial Lease Agreement (“Lease”) is made effective as of [EFFECTIVE DATE] (the “Effective Date”) by and between [LANDLORD LEGAL NAME], a [STATE OF ORGANIZATION & ENTITY TYPE] (“Landlord”), and [TENANT LEGAL NAME], a [STATE OF ORGANIZATION & ENTITY TYPE] (“Tenant”).
1.2 Premises.
Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, the premises commonly known as [PREMISES STREET ADDRESS] and legally described in Exhibit A (the “Premises”), together with (i) non-exclusive rights to all Common Areas appurtenant thereto, and (ii) the right of ingress to and egress from the Premises through the Building’s common lobbies, hallways, driveways, and parking areas, subject to the terms of this Lease.
1.3 Recitals.
A. Landlord owns the real property commonly known as [PROPERTY NAME / ADDRESS] located in the County of [COUNTY], State of California (the “Property”).
B. Landlord desires to lease the Premises to Tenant, and Tenant desires to lease the Premises from Landlord, upon the terms and conditions hereinafter set forth.
C. The parties agree that this Lease shall be governed by, and construed in accordance with, the laws of the State of California.
2. DEFINITIONS
For purposes of this Lease, the following terms shall have the meanings set forth below. Defined terms used in the singular include the plural and vice versa.
“ADA” – The Americans with Disabilities Act of 1990, as amended, and any successor statute thereto.
“Additional Rent” – All monetary obligations of Tenant under this Lease other than Base Rent, including without limitation Operating Expenses, Taxes, Late Charges, Utility Charges, and any other sums payable by Tenant.
“Base Rent” – The fixed monthly rental amount specified in Section 4.1, subject to adjustment as provided herein.
“Building” – The building in which the Premises are located.
“CASp” – A Certified Access Specialist as defined in Cal. Civ. Code § 55.52.
“Commencement Date” – [COMMENCEMENT DATE], or such earlier date on which Tenant first takes possession of the Premises for the conduct of business (excluding early access for improvements).
“Common Areas” – All areas and facilities outside the Premises and within the exterior boundaries of the Property that are provided and designated by Landlord for the general non-exclusive use of tenants and invitees, including driveways, sidewalks, parking areas, landscaped areas, loading docks, hallways, lobbies, elevators, and restrooms.
“Event of Default” – Any of the acts or omissions described in Section 11.1.
“Hazardous Materials” – Any substance, material, waste, pollutant, or contaminant regulated under Environmental Laws, including without limitation petroleum and petroleum derivatives, asbestos, and polychlorinated biphenyls (PCBs).
“Lease Year” – Each consecutive twelve (12)-month period beginning on the Commencement Date (or anniversary thereof).
“Operating Expenses” – All costs and expenses incurred by Landlord in connection with the ownership, operation, management, maintenance, and repair of the Property, except those costs expressly excluded pursuant to Section 4.3.
“Taxes” – All real property taxes, assessments (special or general), and other governmental charges levied against the Property, together with any fees or costs incurred by Landlord in contesting or appealing the same.
[// GUIDANCE: Add additional definitions unique to your transaction, ensuring that each defined term is capitalized consistently throughout.]
3. LEASE OF PREMISES; TERM
3.1 Grant of Lease.
Landlord hereby leases the Premises to Tenant for the Term (defined below) and Tenant hereby accepts such lease subject to the terms and conditions of this Lease.
3.2 Term.
The “Term” shall commence on the Commencement Date and shall expire at 11:59 p.m. on [EXPIRATION DATE], unless sooner terminated in accordance with the provisions hereof.
3.3 Holding Over.
Any holding over by Tenant after expiration or earlier termination of this Lease without Landlord’s written consent shall be deemed a tenancy at sufferance on a day-to-day basis, at a rental rate equal to one hundred fifty percent (150%) of the Base Rent then in effect, plus Additional Rent. Tenant shall also indemnify Landlord for all damages sustained as a result of such holding over.
4. RENT; ADDITIONAL CHARGES; SECURITY DEPOSIT
4.1 Base Rent.
Tenant shall pay to Landlord, without prior demand, offset, deduction, or abatement (except as expressly provided herein), the sum of [BASE RENT AMOUNT] Dollars ($[AMOUNT]) per month as “Base Rent,” payable in advance on or before the first (1st) day of each calendar month during the Term.
4.2 Security Deposit.
(a) Concurrently with Tenant’s execution of this Lease, Tenant shall deposit with Landlord the sum of [SECURITY DEPOSIT AMOUNT] Dollars ($[AMOUNT]) (the “Security Deposit”), as security for the faithful performance by Tenant of all obligations under this Lease.
(b) Landlord may, but shall not be required to, apply all or any portion of the Security Deposit to the cure of any Event of Default. If any portion is so applied, Tenant shall within five (5) business days following written notice restore the Security Deposit to the full amount originally deposited.
4.3 Additional Rent – Operating Expenses and Taxes.
(a) Tenant shall pay Tenant’s Proportionate Share (defined below) of Operating Expenses and Taxes as Additional Rent, in the manner set forth in Exhibit B.
(b) “Tenant’s Proportionate Share” means [PROPORTIONATE SHARE] % of the Building, calculated by dividing the rentable square footage of the Premises by the rentable square footage of the Building.
4.4 Late Charges; Interest.
If any installment of Base Rent or Additional Rent is not received by Landlord within five (5) days after the due date, Tenant shall pay to Landlord (i) a late charge equal to five percent (5%) of the overdue amount, and (ii) interest on such overdue amount from the original due date until paid at the lesser of ten percent (10%) per annum or the maximum rate permitted by law.
4.5 Net Lease Provision.
This Lease is intended to be a “net lease,” and except as expressly provided otherwise herein, all costs, expenses, and obligations relating to the Premises and the operations therein shall be borne by Tenant.
5. USE OF PREMISES; COMPLIANCE WITH LAWS
5.1 Permitted Use.
The Premises shall be used solely for [PERMITTED USE – e.g., general office, retail, light manufacturing] and for no other purpose without Landlord’s prior written consent, which may be withheld in Landlord’s sole discretion.
5.2 Legal Compliance.
(a) Tenant shall, at Tenant’s sole cost and expense, comply with all applicable federal, state, and local statutes, codes, ordinances, regulations, and orders (collectively, “Laws”), including without limitation (i) Title 24, (ii) the ADA, (iii) Cal. Civ. Code § 1938 (CASp disclosures), and (iv) all Environmental Laws (as defined in Section 10).
(b) Landlord represents that, as of the Effective Date, Landlord [HAS/HAS NOT] obtained a CASp inspection for the Premises. Pursuant to Cal. Civ. Code § 1938(e), a disclosure statement is attached hereto as Exhibit C.
5.3 Signs.
All signs, awnings, and graphics visible from the exterior of the Premises shall be subject to Landlord’s prior written approval and shall comply with applicable signage ordinances. Upon expiration or earlier termination of this Lease, Tenant shall remove all signs and repair any resulting damage.
5.4 Rules and Regulations.
Tenant shall comply with the rules and regulations promulgated by Landlord from time to time for the orderly operation of the Property, provided that such rules are reasonable, uniformly applied, and do not materially conflict with this Lease.
6. ALTERATIONS; MAINTENANCE AND REPAIRS
6.1 Alterations by Tenant.
(a) Tenant shall not make any alterations, additions, or improvements (collectively “Alterations”) to the Premises without Landlord’s prior written consent; provided, however, that cosmetic Alterations (e.g., painting, carpeting) not exceeding $[LIMIT] in cost in any 12-month period may be made without such consent so long as the Building’s structural integrity and systems are not affected.
(b) All Alterations shall be performed (i) in a good and workmanlike manner, (ii) in compliance with all Laws, and (iii) using only licensed, insured contractors approved by Landlord.
(c) All Alterations (other than Tenant’s trade fixtures and personal property) shall, at Landlord’s election, become the property of Landlord upon installation; provided that Landlord may require Tenant to remove any Alterations and restore the Premises to its prior condition at Tenant’s cost.
6.2 Maintenance and Repairs.
(a) Landlord shall maintain the roof, foundation, exterior walls (excluding interior surfaces), structural elements, and common building systems (e.g., elevators, fire-life-safety, and central HVAC serving Common Areas).
(b) Tenant shall, at Tenant’s sole cost, maintain in good order and repair the interior of the Premises, including without limitation interior walls, floor coverings, doors, windows, glass, plumbing fixtures, and HVAC equipment exclusively serving the Premises.
(c) If Tenant fails to perform required maintenance within ten (10) days after written notice, Landlord may perform such maintenance and charge Tenant all reasonable costs plus an administrative fee equal to ten percent (10%) of such costs.
7. ASSIGNMENT AND SUBLETTING
7.1 Landlord’s Consent Required.
Tenant shall not directly or indirectly assign this Lease, sublease all or any portion of the Premises, or transfer any interest herein (each a “Transfer”) without Landlord’s prior written consent, which consent shall not be unreasonably withheld, conditioned, or delayed, subject to the provisions of this Section 7.
7.2 Transfer Procedures.
(a) Tenant shall provide Landlord with at least thirty (30) days’ prior written notice of any proposed Transfer, together with (i) the identity and legal structure of the proposed transferee, (ii) financial statements for the past two (2) fiscal years, and (iii) a summary of the proposed use.
(b) Within fifteen (15) business days following receipt of the required information, Landlord shall elect to (i) consent to the Transfer, (ii) withhold consent with a written statement of reasonable grounds, or (iii) recapture the portion of the Premises subject to the proposed Transfer (but not less than the entire Premises in the case of an assignment).
7.3 Permitted Transfers.
Notwithstanding Section 7.1, Tenant may assign this Lease to a parent, subsidiary, or affiliate controlling, controlled by, or under common control with Tenant, or to a successor entity resulting from merger, consolidation, or the purchase of substantially all of Tenant’s assets, provided that (i) Tenant gives Landlord prior written notice, (ii) the transferee assumes in writing all obligations of Tenant, and (iii) the net worth of the transferee is at least equal to Tenant’s net worth immediately prior to the Transfer.
7.4 No Release.
No Transfer, whether or not consented to by Landlord, shall release Tenant from any liability under this Lease unless expressly agreed in writing by Landlord.
8. INSURANCE; WAIVER OF SUBROGATION
8.1 Tenant’s Insurance.
Tenant shall, at its sole cost, procure and maintain throughout the Term:
(a) Commercial General Liability Insurance with limits of not less than $[LIMIT] per occurrence and $[LIMIT] aggregate, naming Landlord, any property manager, and Landlord’s mortgagee as additional insureds;
(b) Property Insurance covering Tenant’s personal property, trade fixtures, and Alterations, written on a Special Form basis, in an amount not less than one hundred percent (100%) of replacement cost;
(c) Workers’ Compensation Insurance as required by applicable law; and
(d) Business Automobile Liability insurance (if vehicles are used in Tenant’s operations) with limits of not less than $[LIMIT] combined single limit.
8.2 Landlord’s Insurance.
Landlord shall maintain property insurance on the Building (exclusive of Tenant’s property) in an amount equal to full replacement cost, and Commercial General Liability Insurance with limits customary for similar properties in the geographic market.
8.3 Waiver of Subrogation.
To the fullest extent permitted by law, Landlord and Tenant each waive any right of recovery against the other party (and their respective officers, directors, partners, members, employees, and agents) for any loss or damage covered by their respective property insurance policies. Each party shall obtain a clause or endorsement in favor of such waiver from its insurer.
9. INDEMNIFICATION; LIMITATION OF LIABILITY
9.1 Tenant’s Indemnity.
Tenant shall indemnify, defend, and hold harmless Landlord, its affiliates, property manager, and their respective partners, members, shareholders, officers, directors, employees, and agents (“Landlord Indemnitees”) from and against any and all claims, damages, losses, liabilities, costs, and expenses (including reasonable attorneys’ fees) arising out of (a) the use or occupancy of the Premises by Tenant or Tenant’s agents, employees, contractors, invitees, or subtenants, (b) any act or omission of Tenant or such parties, (c) Tenant’s breach of this Lease, or (d) the presence or release of Hazardous Materials in or about the Premises caused or permitted by Tenant.
9.2 Limitation of Liability.
Notwithstanding anything to the contrary contained herein, in no event shall either party be liable to the other for any consequential, incidental, special, punitive, or exemplary damages arising out of or related to this Lease, except in connection with (i) third-party claims subject to indemnification under Section 9.1, (ii) fraud or willful misconduct, or (iii) Tenant’s holdover.
[// GUIDANCE: Insert negotiated aggregate liability cap here if desired, e.g., “The aggregate liability of Landlord under this Lease shall not exceed $___.”]
10. ENVIRONMENTAL MATTERS
10.1 Compliance With Environmental Laws.
Tenant shall, at its expense, comply with all Environmental Laws applicable to the Premises and Tenant’s operations thereon, including without limitation the federal Comprehensive Environmental Response, Compensation, and Liability Act (42 U.S.C. § 9601 et seq.), the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.), the California Health & Safety Code, and any regulations promulgated thereunder.
10.2 Hazardous Materials.
(a) Tenant shall not cause or permit any Hazardous Materials to be generated, used, stored, released, or disposed of on, under, or about the Premises except in quantities and in a manner expressly permitted by applicable Environmental Laws.
(b) Upon discovery of any spill or release of Hazardous Materials, Tenant shall immediately (i) notify Landlord in writing, and (ii) take all necessary actions to remediate in accordance with Environmental Laws.
(c) Tenant shall, upon Landlord’s request, provide copies of all permits, manifests, and correspondence with governmental agencies relating to Hazardous Materials.
10.3 Environmental Indemnity.
Tenant shall indemnify, defend, and hold harmless the Landlord Indemnitees from and against any and all claims, damages, costs, and liabilities (including diminution in value of the Property) arising out of any breach of Tenant’s obligations under this Section 10, including without limitation remediation costs, natural resource damages, and attorneys’ and consultants’ fees.
11. DEFAULTS; REMEDIES
11.1 Events of Default.
The occurrence of any one or more of the following shall constitute an “Event of Default”:
(a) Tenant fails to pay any installment of Base Rent or Additional Rent within five (5) days after written notice that such amount is past due;
(b) Tenant fails to perform any non-monetary obligation under this Lease and such failure continues for thirty (30) days after written notice (or such longer period as reasonably required so long as Tenant commences cure within such 30-day period and diligently prosecutes the same to completion);
(c) Tenant files a petition in bankruptcy or is adjudged bankrupt or insolvent; or
(d) Tenant vacates or abandons the Premises for thirty (30) consecutive days.
11.2 Landlord’s Remedies.
Upon the occurrence of an Event of Default, Landlord may, in addition to any other rights or remedies permitted by law or equity:
(a) Terminate Tenant’s right to possession pursuant to Cal. Code Civ. Proc. §§ 1161–1179a, recover immediate possession of the Premises, and (i) accelerate Rent, or (ii) pursue damages under Cal. Civ. Code § 1951.2;
(b) Continue the Lease in effect pursuant to Cal. Civ. Code § 1951.4 and recover Rent as it becomes due;
(c) Re-enter and relet the Premises on Tenant’s behalf, applying all rents collected to Landlord’s damages;
(d) Perform, on Tenant’s behalf, any obligation that Tenant fails to perform, and charge Tenant all reasonable costs plus interest at the rate specified in Section 4.4; and
(e) Recover reasonable attorneys’ fees and costs incurred in enforcing this Lease.
11.3 Landlord’s Lien.
In addition to any statutory landlord’s lien, Tenant grants Landlord a security interest in all of Tenant’s personal property and trade fixtures located in the Premises as security for performance of Tenant’s obligations. At Landlord’s request, Tenant shall execute a UCC-1 financing statement to perfect such security interest.
11.4 Cumulative Remedies; Mitigation.
All rights and remedies of Landlord are cumulative and not exclusive. Landlord shall use commercially reasonable efforts to mitigate its damages following an Event of Default.
12. CONDEMNATION; CASUALTY
12.1 Condemnation.
If the whole or any material portion of the Premises is taken by eminent domain, either party may terminate this Lease by written notice within thirty (30) days after the taking. All condemnation awards shall belong to Landlord, except Tenant may claim an award for its moving costs and personal property.
12.2 Casualty.
If the Premises are damaged by fire or other casualty, Landlord shall repair the Premises within a reasonable period; provided, however, that Landlord may terminate this Lease upon thirty (30) days’ written notice if (i) the damage is uninsured, (ii) repair cannot be completed within one hundred eighty (180) days, or (iii) more than thirty percent (30%) of the rentable area of the Building is damaged.
13. DISPUTE RESOLUTION
13.1 Governing Law.
This Lease and any dispute arising hereunder shall be governed by the laws of the State of California, without regard to conflict-of-laws principles.
13.2 Forum Selection.
The parties irrevocably submit to the exclusive jurisdiction of the state courts located in [COUNTY], California for the adjudication of any claim or dispute arising under this Lease, subject to Section 13.3 (Arbitration).
13.3 Arbitration (Optional).
[OPTION 1 – DELETE IF NOT APPLICABLE]
At either party’s election, any dispute (other than an unlawful detainer or other action seeking possession of real property) shall be resolved by binding arbitration administered by JAMS in accordance with its Comprehensive Arbitration Rules. The arbitration shall take place in [CITY], California before a single arbitrator who is a retired California judge with at least ten (10) years’ experience in commercial real estate. Judgment on the award may be entered in any court having jurisdiction.
13.4 Jury Trial Waiver (Optional).
EACH PARTY HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING RELATING TO THIS LEASE.
13.5 Injunctive Relief.
Nothing in this Section 13 shall limit either party’s right to seek provisional or injunctive relief, including but not limited to a writ of possession or unlawful detainer, in any court of competent jurisdiction.
14. GENERAL PROVISIONS
14.1 Notices.
All notices required or permitted under this Lease shall be in writing and delivered (i) by hand with signed receipt, (ii) by certified mail, return receipt requested, (iii) by nationally recognized overnight courier, or (iv) by electronic mail with confirmation of delivery, to the addresses set forth below (or such other address as either party may designate by notice). Notices shall be deemed given upon receipt or first attempted delivery, whichever is earlier.
14.2 Amendment; Waiver.
No amendment or modification of this Lease shall be effective unless in writing and signed by both parties. No waiver by either party of any breach shall be deemed a waiver of any other breach.
14.3 Severability.
If any provision of this Lease is held invalid or unenforceable, the remaining provisions shall remain in full force, and the invalid provision shall be construed in a manner that most closely matches its original intent while remaining enforceable.
14.4 Successors and Assigns.
Subject to Section 7, this Lease shall be binding upon and inure to the benefit of the parties and their respective successors and permitted assigns.
14.5 Entire Agreement.
This Lease, together with the exhibits hereto, constitutes the entire agreement between the parties and supersedes all prior proposals, negotiations, and understandings.
14.6 Force Majeure.
Neither party shall be liable for failure to perform its obligations (other than payment of Rent) when such failure is due to events beyond its reasonable control, including acts of God, war, terrorism, civil commotion, governmental orders, strikes, epidemics, or shortage of materials (“Force Majeure”). The time for performance shall be extended for the period of such Force Majeure.
14.7 Counterparts; Electronic Signatures.
This Lease may be executed in counterparts, each of which shall be deemed an original, and all of which together constitute one instrument. Signatures delivered by facsimile, PDF, or electronic signature technology (e.g., DocuSign) shall be deemed originals.
15. EXECUTION BLOCK
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of the Effective Date.
LANDLORD:
[LANDLORD LEGAL NAME]
By: _____
Name: _____
Title: ________
Date: ________
TENANT:
[TENANT LEGAL NAME]
By: _____
Name: _____
Title: ________
Date: ________
NOTARY ACKNOWLEDGMENTS
[// GUIDANCE: Insert California notary acknowledgment(s) if required by local recording offices or by the parties’ lenders.]
EXHIBITS
Exhibit A – Legal Description of the Premises
Exhibit B – Operating Expense and Tax Allocation Methodology
Exhibit C – California CASp Inspection Disclosure
Exhibit D – Rules and Regulations
[// GUIDANCE: Attach or draft each exhibit. Expand Exhibit B to include detailed calculation formulas and sample reconciliation. Ensure Exhibit D complies with any CC&R or zoning requirements specific to the Property.]
[// GUIDANCE: Prior to execution, confirm compliance with any local ordinances pertaining to energy usage disclosures (e.g., Cal. Pub. Res. Code § 25402.10), and coordinate with counsel to ensure consistency with lender requirements, SNDA obligations, and any CC&Rs encumbering the Property.]