Commercial Lease Agreement - Minnesota

COMMERCIAL LEASE AGREEMENT

(Minnesota)

TABLE OF CONTENTS

1. Definitions
2. Lease of Premises; Term
3. Rent and Other Charges
4. Use; Compliance With Laws
5. Maintenance and Repairs
6. Alterations
7. Assignment and Subletting
8. Insurance; Indemnity; Limitation of Liability
9. Environmental Matters
10. Default; Remedies
11. Damage or Destruction
12. Condemnation
13. Dispute Resolution
14. General Provisions
15. Execution

(Exhibits A–D, as applicable)

1. DEFINITIONS

For ease of reference, the following terms have the meanings set forth below. Any term not defined in this Article 1 but defined elsewhere in this Lease shall have the meaning given at its first use.

“Additional Rent” – All amounts (other than Base Rent) payable by Tenant pursuant to this Lease, including without limitation Operating Expenses, Taxes, utilities, and late fees.
“Affiliate” – Any entity that Controls, is Controlled by, or is under common Control with a party.
“Base Rent” – The fixed rental amounts set forth in Section 3.1.
“Building” – The structure located at the Property that contains the Premises.
“Business Day” – Any day other than Saturday, Sunday, or a federal or Minnesota state holiday.
“Commencement Date” – [COMMENCEMENT DATE].
“Control” – Possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of an entity.
“Event of Default” – Any event described in Section 10.1.
“Expiration Date” – The last day of the Term, as adjusted pursuant hereto.
“Hazardous Materials” – Any substance, material, or waste that is regulated under Environmental Laws.
“Landlord” – [FULL LEGAL NAME], a [STATE] [ENTITY TYPE], and its successors and assigns.
“Landlord Parties” – Landlord, its Affiliates, and the respective partners, shareholders, members, managers, officers, directors, employees, and agents of each.
“Lease” – This Commercial Lease Agreement, together with all Exhibits.
“Operating Expenses” – All costs of owning, operating, managing, maintaining, repairing, and insuring the Property and Building, as more particularly described in Section 3.3.
“Premises” – The space shown on Exhibit A containing approximately ☐ rentable square feet located at [STREET ADDRESS], within the Building.
“Property” – The parcel of real property legally described on Exhibit A and all improvements thereon.
“Rent” – Collectively, Base Rent and Additional Rent.
“Tenant” – [FULL LEGAL NAME], a [STATE] [ENTITY TYPE], and its permitted successors and assigns.
“Tenant Parties” – Tenant, its Affiliates, subtenants, concessionaires, licensees, contractors, and the respective partners, shareholders, members, managers, officers, directors, employees, agents, invitees, and customers of each.
“Term” – The term of this Lease as set forth in Article 2.

2. LEASE OF PREMISES; TERM

2.1 Lease Grant. Landlord hereby leases the Premises to Tenant, and Tenant hereby leases the Premises from Landlord, upon the terms and conditions set forth herein.

2.2 Term. The Term shall commence on the Commencement Date and continue for [NUMBER] (__) years, expiring on the Expiration Date, unless sooner terminated in accordance with this Lease.

2.3 Possession & Delivery. Landlord shall deliver possession of the Premises to Tenant in broom-clean condition on the Commencement Date, free of any prior occupants, and with Landlord’s Work (if any) substantially complete.

2.4 Renewal Option. [OPTIONAL] Tenant shall have [ONE/TWO] option(s) to renew the Term for [TERM] each upon at least [___] days’ prior written notice and otherwise on the terms set forth in Exhibit C.

3. RENT AND OTHER CHARGES

3.1 Base Rent. Tenant shall pay Base Rent in the following amounts, without set-off or deduction, in advance on the first day of each calendar month:

Year 1: $[___] per month ($[___]/SF)
Year 2: $[___] per month
[Add schedule through Term]

3.2 Payment Mechanics. All Rent shall be paid in lawful money of the United States by ACH transfer to an account designated by Landlord (or such other manner specified by Landlord) and shall be deemed paid when actually received by Landlord.

3.3 Operating Expenses. Tenant shall pay Tenant’s Proportionate Share ([___] %) of all Operating Expenses within 30 days after billing. Operating Expenses include, without limitation: insurance, utilities for Common Areas, maintenance, repair, property management fees (not exceeding 4% of gross revenues), snow and ice removal, security, and reserves.

3.4 Taxes. Tenant shall pay Tenant’s Proportionate Share of all real estate taxes, special assessments, and governmental charges (“Taxes”) assessed against the Property.

3.5 Late Charges; Interest. If Rent remains unpaid five (5) Business Days after it is due, Tenant shall pay a one-time late charge of [___]% of the overdue amount and simple interest at [___]% per annum, but never more than applicable law allows. Counsel must test the selected charge and rate under Minn. Stat. §§ 334.01 and 334.011 and the transaction facts. Section 334.01 ordinarily states a six-percent legal rate absent a different written rate and an eight-percent ceiling for a loan or forbearance, subject to exceptions including subdivision 2's written credit contract of $100,000 or more; § 334.011 supplies a variable ceiling for certain sub-$100,000 business-purpose loans or forbearances. Do not assume that every commercial lease supports a fixed 12% rate.

3.6 Security Deposit. Upon execution, Tenant shall deliver a security deposit of $[___]. The parties shall state the permitted applications, replenishment duty, transfer treatment, return deadline, and itemization procedure here. Minn. Stat. § 504B.178 expressly governs money securing a residential rental agreement; do not import its one-percent interest, return deadlines, or inspection procedure into this commercial form. Counsel must still check any local rule, mixed-use facts, and other applicable law.

4. USE; COMPLIANCE WITH LAWS

4.1 Permitted Use. Tenant shall use the Premises solely for [SPECIFIC PERMITTED USE] and for no other purpose without Landlord’s prior written consent.

4.2 Legal Compliance. Tenant, at its sole cost, shall comply with present and future federal, state, and local statutes, ordinances, rules, and regulations applicable to Tenant's use, operations, and alterations. Chapter 504B contains the Minnesota eviction process and some provisions that reach real-property tenancies generally, but many of its protections expressly turn on a “residential tenant,” “residential building,” or “residential rental agreement.” Apply each section by its own text; do not treat the entire chapter as a commercial operating code.

4.3 Signage. All signage is subject to Landlord’s prior written approval (not to be unreasonably withheld) and compliance with applicable zoning and municipal ordinances.

4.4 Conduct. Tenant shall not create any nuisance, interfere with other occupants, or permit any use that would increase insurance premiums or void insurance.

5. MAINTENANCE AND REPAIRS

5.1 Landlord Obligations. Landlord shall maintain and repair structural elements of the Building, the roof, foundation, and Common Areas, and shall keep building systems (HVAC, electrical, plumbing) in good working order, except to the extent damage is caused by Tenant Parties.

5.2 Tenant Obligations. Tenant shall maintain the Premises, including interior surfaces, ceilings, floor coverings, doors, windows, non-structural plumbing, and all Tenant improvements, in good order and repair, ordinary wear and tear excepted.

5.3 Right of Entry. Landlord may enter the Premises upon reasonable notice (except in emergencies) to inspect, perform maintenance, or show to prospective tenants or purchasers.

6. ALTERATIONS

6.1 Consent Required. Tenant shall not make any alterations, additions, or improvements (“Alterations”) without Landlord’s prior written consent; cosmetic, non-structural Alterations costing less than $[___] in the aggregate during any 12-month period shall not require consent but shall require prior notice.

6.2 Construction Standards. All Alterations shall be performed in a first-class manner, in compliance with Laws, using licensed contractors, and free of liens.

6.3 Ownership; Removal. Unless Landlord elects otherwise at the time consent is granted, all Alterations shall become Landlord’s property at expiration; however, Landlord may require Tenant to remove Alterations and restore the Premises to its original condition, reasonable wear and tear excepted.

7. ASSIGNMENT AND SUBLETTING

7.1 Restriction. Tenant shall not assign this Lease or sublet any portion of the Premises (each a “Transfer”) without Landlord’s prior written consent, which shall not be unreasonably withheld, conditioned, or delayed, subject to Section 7.2.

7.2 Permitted Transfers. Notwithstanding Section 7.1, Tenant may Transfer, without Landlord’s consent but upon prior notice, to:
(a) an Affiliate;
(b) any successor by merger, consolidation, or sale of substantially all of Tenant’s assets, provided Tenant’s net worth is not thereby reduced.

7.3 Transfer Premium. If consideration paid by Transferee exceeds Rent (on a rentable square foot basis), Tenant shall pay Landlord 50% of the net excess.

7.4 Continuing Liability. No Transfer shall release Tenant from primary liability unless expressly agreed by Landlord in writing.

8. INSURANCE; INDEMNITY; LIMITATION OF LIABILITY

8.1 Tenant Insurance. Throughout the Term, Tenant shall maintain:
a. Commercial General Liability: $[1,000,000] per occurrence / $[2,000,000] aggregate;
b. Property/Builder’s Risk: Full replacement cost of Tenant’s property and Alterations;
c. Workers’ Compensation: Statutory limits;
d. Business Auto (if vehicles used): $[1,000,000] combined single limit.
Policies shall (i) name Landlord as additional insured (except workers’ compensation), (ii) be issued by carriers rated A-VII or better by A.M. Best, (iii) include waiver of subrogation in favor of Landlord Parties.

8.2 Landlord Insurance. Landlord shall maintain “all-risk” property insurance on the Building (excluding Tenant’s property) at at least 90% replacement cost, and commercial general liability of not less than $[2,000,000] per occurrence.

8.3 Mutual Waiver of Subrogation. Each party releases the other (and waives all rights of recovery) for insured claims, and shall cause its insurers to acknowledge such waiver.

8.4 Indemnity. Tenant shall indemnify, defend, and hold harmless Landlord Parties from and against all claims, damages, liabilities, and expenses (including reasonable attorneys’ fees) arising out of (i) the use, occupancy, or operation of the Premises by Tenant Parties, (ii) any breach of this Lease by Tenant, or (iii) the negligence or willful misconduct of Tenant Parties. The foregoing obligation survives expiration or termination.

8.5 Limitation of Liability. [OPTIONAL — COUNSEL REVIEW.] Subject to enforceability and public-policy review, neither party shall be liable to the other for [IDENTIFY EXCLUDED DAMAGES]. No exclusion or cap applies to fraud, intentional or willful misconduct, an obligation to pay Rent, a party's express indemnity, or liability that law does not permit the party to limit. State the negotiated cap, if any: $[___]. Minnesota courts strictly construe exculpatory terms against the benefited party and do not enforce clauses that ambiguously reach, or purport to release, intentional, willful, or wanton acts. The allocation also must be assessed for bargaining power and the type of service involved.

9. ENVIRONMENTAL MATTERS

9.1 Compliance. Tenant shall, at its expense, comply with Environmental Laws applicable to Tenant's use and shall not cause or permit a release of Hazardous Materials, except lawful use and storage of disclosed ordinary business materials. Attach a use-specific inventory where appropriate; a generic office-supplies exception is inadequate for industrial, medical, automotive, laboratory, dry-cleaning, agricultural, or similarly regulated uses.

9.2 Tenant Remediation. Tenant shall investigate and remediate a release caused by Tenant Parties only to the extent required by applicable Environmental Laws and government orders, using qualified consultants reasonably acceptable to Landlord. This clause does not assign pre-existing contamination or contamination caused by Landlord Parties to Tenant.

9.3 Environmental Indemnity. Tenant shall indemnify Landlord Parties from any claims, fines, penalties, costs, or liabilities (including remediation costs and attorneys’ fees) arising from Tenant Parties’ violation of Environmental Laws or release of Hazardous Materials.

9.4 Existing Conditions and Due Diligence. Landlord discloses the following environmental reports, notices, institutional controls, tanks, spills, and known conditions: [________________________________]. Tenant's due-diligence and reliance rights are: [________________________________]. Do not use a knowledge-only “no written notice” statement as a substitute for Phase I review, use-specific investigation, or a negotiated allocation of pre-existing conditions.

10. DEFAULT; REMEDIES

10.1 Events of Default. Each of the following constitutes an Event of Default:
a. Failure to pay any Rent within five (5) days after written notice that such payment is overdue (notice only required twice in any 12-month period);
b. Material breach of any non-monetary obligation, if not cured within 30 days after notice (or such longer period as is reasonably required, provided Tenant commences cure within such 30 days and diligently pursues same);
c. Abandonment or vacation of the Premises for more than 15 consecutive days;
d. Attempted Transfer in violation of Article 7;
e. Insolvency, assignment for the benefit of creditors, appointment of a receiver, or commencement of a bankruptcy case, only to the extent the event and remedy are enforceable. Under 11 U.S.C. § 365(b)(2), a default based on insolvency, financial condition, a bankruptcy filing, or appointment of a trustee or prepetition custodian is not a default that must be cured as a condition of assumption. Section 365(c)(3) separately addresses a nonresidential lease already terminated under applicable nonbankruptcy law before the order for relief.

10.2 Landlord Remedies. After an Event of Default and any required contractual notice and cure period, Landlord may:
a. terminate Tenant's right of possession or terminate this Lease as the text of Landlord's notice specifies;
b. commence an eviction action under Minn. Stat. §§ 504B.285, 504B.291, or 504B.301, as applicable, and recover possession only through surrender or lawful execution of a writ under §§ 504B.345 and 504B.365;
c. recover accrued unpaid Rent and proven contract damages;
d. use reasonable efforts to mitigate after termination, including reasonable reletting or other reasonable use of the Premises, and credit mitigation proceeds as law requires; and
e. recover reasonable attorneys' fees only if this Lease or another applicable authority permits them.

Landlord may not use a lockout, removal of Tenant's property, or interruption of essential services as a private substitute for court process. The contractual remedies are cumulative only to the extent they are not inconsistent and do not produce a duplicate recovery.

10.3 Commercial Eviction and Redemption. Minn. Stat. § 504B.285, subdivision 1(a)(2), permits recovery when a person holds over after the lease term, contrary to lease conditions or covenants, or after rent becomes due. Section 504B.291 governs nonpayment actions and generally permits redemption before possession is delivered by paying rent arrears, interest, action costs, the statutory attorney fee, and performing other lease covenants; leases longer than 20 years have the separate notice and restoration rules in subdivision 2. Counsel must select and document the actual ground before filing.

10.4 Acceleration and Mitigation. [OPTIONAL — COUNSEL REVIEW.] If Landlord terminates this Lease for Tenant's uncured default, Landlord may claim the present value of contract damages, including future Rent, less costs avoided and the net amount Landlord receives or reasonably could receive through mitigation. The discount rate and mitigation method are: [________________________________]. Lagoon Partners, LLC v. Silver Cinemas Acquisition Co., No. A23-0194 (Minn. Ct. App. Dec. 11, 2023), held a commercial-lease liquidated-damages clause unenforceable where actual damages were measurable and the formula did not account for the landlord's duty to mitigate. This clause is not an agreement that the entire remaining Rent is automatically collectible without proof, offsets, or bankruptcy limits; 11 U.S.C. § 502(b)(6) caps a lessor's lease-termination claim in bankruptcy.

10.5 Landlord Default. Landlord shall be in default if Landlord fails to perform a material obligation within 30 days after receipt of Tenant's written notice, extended only while Landlord diligently pursues a cure that reasonably requires longer. Subject to negotiated limits and applicable law, Tenant may seek actual damages, specific performance or other equitable relief, and any expressly negotiated rent abatement. Delete “sole remedy” language unless the parties deliberately intend and counsel approves that allocation.

11. DAMAGE OR DESTRUCTION

11.1 Restoration. If the Premises are damaged by fire or other casualty, Landlord shall restore the portions Landlord is obligated to insure, subject to insurance proceeds, permits, lender requirements, and the termination rights below. Rent shall abate in proportion to the part of the Premises that cannot reasonably be used for the Permitted Use, except to the extent the casualty was caused by Tenant Parties and the parties have validly allocated that risk.

11.2 Termination Rights. Landlord may terminate if a qualified professional reasonably estimates restoration will exceed [240] days, insurance proceeds are unavailable despite the required coverage, or the casualty occurs during the final [___] months. Tenant may terminate if the Premises cannot reasonably be used for the Permitted Use and restoration is estimated to exceed [240] days or is not substantially complete by an agreed outside date, subject to delays not caused by Landlord. State the notice windows and treatment of insurance deductibles, uninsured improvements, and end-of-term casualties expressly.

12. CONDEMNATION

12.1 Taking. A party may terminate if a taking makes the remaining Premises not reasonably usable for the Permitted Use, materially impairs access or parking identified as material in Exhibit A, or takes more than [___]% of the Premises. Termination is effective on the date the condemning authority takes possession unless the parties agree otherwise. Minn. Stat. § 117.025 defines an “owner” to include tenants and other interest holders, and § 117.042 governs when a condemning authority may take possession.

12.2 Awards and Separate Claims. Landlord claims the award attributable to the fee and Landlord's interest. Tenant may assert any separate claim available to a lessee or displaced business, including fixtures, personal property, relocation assistance, or going-concern loss, so long as Tenant does not claim the same element awarded to Landlord. Minn. Stat. § 117.186 includes a lessee operating a business within its “owner” definition for a going-concern claim and requires notice within 60 days of the first § 117.075 hearing; § 117.52 supplies relocation assistance when its conditions apply. Section 117.187's minimum-compensation rule, by contrast, defines “owner” as the fee-title holder.

13. DISPUTE RESOLUTION

13.1 Governing Law. This Lease and any disputes arising hereunder shall be governed by and construed in accordance with the laws of the State of Minnesota, without regard to its conflicts-of-law principles.

13.2 Forum Selection. Subject to mandatory subject-matter jurisdiction and venue rules, each party submits to Minnesota state or federal courts serving the county where the Premises are located: [COUNTY]. An eviction action must follow Chapter 504B and the filing court's current procedure.

13.3 Optional Arbitration. [OPTIONAL] Upon mutual written agreement made after a dispute arises, the parties may submit the dispute to binding arbitration in accordance with the Commercial Rules of the American Arbitration Association then in effect. Judgment on any award may be entered in any court having jurisdiction.

13.4 Jury Trial. Minnesota Constitution article I, section 4 preserves the civil jury right and allows waiver “in the manner prescribed by law.” Minn. Stat. § 504B.335(b) also states that either party may demand a jury in an eviction action. This template does not include a pre-dispute jury waiver. If the parties want one, Minnesota counsel must supply a conspicuous, transaction-specific clause after confirming the permitted waiver method and its application to eviction and non-eviction claims.

13.5 Equitable Remedies. Either party may request temporary or permanent equitable relief when the governing law and facts support it. Eviction and the writ of recovery are statutory possessory remedies, not private “injunctive relief,” and must proceed under Chapter 504B. No clause predetermines whether a court will require security or a bond.

14. GENERAL PROVISIONS

14.1 Amendment; Waiver. This Lease may be amended only by a writing signed by both parties. No waiver shall be effective unless in writing and signed by the party waiving. A waiver on one occasion shall not constitute a waiver on subsequent occasions.

14.2 Notices. All notices shall be in writing and deemed given (i) upon personal delivery, (ii) one Business Day after deposit with a national overnight courier, or (iii) three Business Days after deposit in U.S. certified mail, return-receipt requested, postage prepaid, to the addresses below (or as either party may designate by notice):

Landlord: [ADDRESS]
Tenant: [ADDRESS]
With copy to: [COUNSEL ADDRESS]

14.3 Successors and Assigns. Subject to Article 7, this Lease is binding upon and inures to the benefit of the parties and their respective successors and assigns.

14.4 Severability. If any provision is unenforceable, it shall be modified to the minimum extent necessary to make it enforceable, and the remainder shall remain in full force and effect.

14.5 Entire Agreement. This Lease (including Exhibits) constitutes the entire agreement between the parties regarding the subject matter and supersedes all prior agreements.

14.6 Counterparts; Electronic Signatures. This Lease may be executed in counterparts and electronically to the extent applicable law permits. If a memorandum, amendment, option, or other instrument will be recorded, prepare a separately recordable instrument satisfying Minn. Stat. § 507.24, including acknowledgment and the applicable original-signature or approved electronic-recording requirements.

14.7 Quiet Enjoyment. So long as Tenant is not in default, Tenant shall peacefully and quietly enjoy the Premises, subject to the terms of this Lease.

14.8 Holding Over. If Tenant holds over without Landlord’s consent, tenancy shall be from month to month at 150% of the then current Rent and subject to all other terms herein, but nothing herein shall be construed as consent to such holding over.

14.9 Force Majeure. Neither party shall be liable for failure to perform (except monetary obligations) due to events beyond its reasonable control, including acts of God, war, terrorism, pandemics, or governmental orders, provided the affected party gives prompt notice and resumes performance as soon as practicable.

15. EXECUTION

IN WITNESS WHEREOF, the parties have executed this Lease as of the Effective Date.

LANDLORD:
[FULL LEGAL NAME]
By: _______________________________
Name: _____________________________
Title: ______________________________
Date: ______________________________

TENANT:
[FULL LEGAL NAME]
By: _______________________________
Name: _____________________________
Title: ______________________________
Date: ______________________________

[Use a Minnesota-compliant acknowledgment on any instrument intended for recording. Minn. Stat. § 507.24 requires an instrument affecting real estate to be executed and acknowledged to be recordable.]

EXHIBITS (attach as applicable)

Exhibit A – Floor Plan and Legal Description of Property
Exhibit B – Building Rules and Regulations
Exhibit C – Renewal Option / Landlord’s Work
Exhibit D – Form of Guaranty

SOURCES AND REFERENCES

• Minnesota Revisor — Chapter 504B
• Minnesota Revisor — §§ 334.01 and 334.011
• Minnesota Revisor — Chapter 117
• Minnesota Revisor — § 507.24
• Minnesota Constitution, article I, section 4
• 11 U.S.C. §§ 365 and 502(b)(6), current United States Code editions published by GovInfo
• Lagoon Partners, LLC v. Silver Cinemas Acquisition Co., No. A23-0194 (Minn. Ct. App. Dec. 11, 2023)