COMMERCIAL LEASE AGREEMENT
(South Dakota – Triple Net Form)
[// GUIDANCE: This template is intended for commercial (non-residential) property located in the State of South Dakota. It is drafted as a “triple-net” lease (NNN), shifting most operating expenses to Tenant. Delete or revise sections that are not applicable to the contemplated transaction.]
TABLE OF CONTENTS
- Document Header
- Definitions
- Premises Lease and Term
- Rent; Additional Rent; Payment Mechanics
- Use of Premises; Compliance With Laws
- Representations and Warranties
- Covenants and Restrictions
- Maintenance, Repairs, and Alterations
- Insurance
- Indemnification; Liability Allocation
- Environmental Matters
- Assignment, Subletting, and Transfer
- Default and Remedies
- Dispute Resolution
- Miscellaneous / General Provisions
- Execution Block
1. DOCUMENT HEADER
THIS COMMERCIAL LEASE AGREEMENT (this “Lease”) is made and entered into as of [EFFECTIVE_DATE] (the “Effective Date”), by and between:
• [LANDLORD_NAME], a [STATE_OF_FORMATION] [ENTITY_TYPE], having a principal place of business at [LANDLORD_ADDRESS] (“Landlord”); and
• [TENANT_NAME], a [STATE_OF_FORMATION] [ENTITY_TYPE], having a principal place of business at [TENANT_ADDRESS] (“Tenant”).
Landlord and Tenant are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”
RECITALS
A. Landlord is the fee simple owner of certain real property commonly known as [PROPERTY_NAME] and located at [PROPERTY_ADDRESS], together with the buildings, improvements, and appurtenances thereon (collectively, the “Property”).
B. Tenant desires to lease from Landlord, and Landlord desires to lease to Tenant, a portion of the Property described herein, all upon the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
2. DEFINITIONS
For purposes of this Lease, the following capitalized terms shall have the meanings set forth below. Defined terms include the singular and plural and shall apply equally to the masculine, feminine, and neuter. All cross-references are to sections of this Lease unless otherwise noted.
“Additional Rent” – All monetary obligations of Tenant other than Base Rent, including but not limited to Operating Expenses, Taxes, Insurance Costs, Late Charges, and any other sums payable by Tenant under this Lease.
“Applicable Law” – All statutes, ordinances, rules, regulations, codes, judicial decisions, and administrative orders of any governmental authority with jurisdiction over the Property, the Premises, or either Party, including without limitation all South Dakota laws governing commercial tenancies, eviction procedures, and environmental compliance.
“Base Rent” – The fixed monthly amount set forth in Section 4.1, subject to adjustment as provided herein.
“Business Day” – Any day other than Saturday, Sunday, or a legal holiday recognized by the State of South Dakota.
“Commencement Date” – The date specified in Section 3.2(a) on which the Term begins.
“Event of Default” – Any of the occurrences enumerated in Section 13.1.
“Expiration Date” – The date on which the Term ends pursuant to Section 3.2(b) or earlier termination under this Lease.
“Hazardous Materials” – Any substance regulated by Applicable Law relating to pollution, protection of the environment, or human health, including without limitation petroleum products, asbestos, PCBs, mold, and any substance defined as “hazardous” or “toxic.”
“Operating Expenses” – All costs, fees, and expenses incurred by Landlord in operating, managing, repairing, maintaining, and protecting the Property, as more particularly described in Section 4.3.
“Permitted Use” – The use described in Section 5.1.
“Premises” – The leasable space containing approximately [PREMISES_SQUARE_FEET] rentable square feet, as outlined on Exhibit A attached hereto.
“Security Deposit” – The amount described in Section 4.5.
“Taxes” – All real property taxes, special assessments, and governmental charges relating to the Property, as allocated in Section 4.4.
[// GUIDANCE: Add, delete, or edit definitions as needed for your transaction. Keep definitions alphabetized.]
3. PREMISES LEASE AND TERM
3.1 Lease of Premises. Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord, the Premises, together with the non-exclusive right to use in common with others the parking areas, driveways, and other common areas of the Property, subject to the terms of this Lease.
3.2 Term.
(a) Commencement Date. The Term shall commence on the earlier of (i) [DATE_CERTAIN] or (ii) the date Tenant first conducts business in the Premises.
(b) Expiration Date. The Term shall expire at 11:59 p.m. on [TERM_END_DATE], unless sooner terminated in accordance with this Lease.
(c) Option(s) to Extend. Tenant shall have [NUMBER] option(s) to extend the Term for successive periods of [EXTENSION_LENGTH] each (“Extension Term(s)”) upon at least [NOTICE_PERIOD] days’ prior written notice to Landlord and provided no Event of Default exists at the time of exercise.
4. RENT; ADDITIONAL RENT; PAYMENT MECHANICS
4.1 Base Rent. Commencing on the Commencement Date, Tenant shall pay to Landlord monthly Base Rent in the initial amount of $[BASE_RENT] per month, payable in advance on or before the first (1st) day of each calendar month. Base Rent shall escalate by [PERCENTAGE]% on each anniversary of the Commencement Date (or as otherwise set forth in the rent schedule attached as Exhibit B).
4.2 Triple Net Intent. It is the express intention of the Parties that this Lease be absolutely net to Landlord. Accordingly, Tenant shall pay all costs and expenses relating to the Premises and its proportionate share (as set forth in Exhibit C) of costs relating to the Property.
4.3 Operating Expenses. Tenant shall pay, as Additional Rent, its share of Operating Expenses, including without limitation:
a) property management fees not exceeding [PERCENTAGE]% of gross rent;
b) maintenance and repair of common areas;
c) utilities serving the common areas;
d) security services;
e) capital expenditures amortized over their useful life (exclusive of expenditures by Landlord to remedy Landlord’s breach or to remediate pre-existing environmental conditions).
4.4 Taxes. Tenant shall pay, as Additional Rent, all Taxes allocable to the Premises and Tenant’s share of Taxes allocable to the common areas, together with any taxes assessed on Tenant’s personal property or its business operations.
4.5 Security Deposit. Upon execution of this Lease, Tenant shall deposit with Landlord the Security Deposit in the amount of $[SECURITY_DEPOSIT]. Landlord may (but shall not be required to) apply the Security Deposit to cure Tenant defaults pursuant to Section 13.3, in which case Tenant shall promptly replenish the Security Deposit upon written demand.
4.6 Payment Mechanics. All Rent shall be paid in lawful money of the United States to Landlord at [PAYMENT_ADDRESS] or at such other address as Landlord may designate in writing. Rent not paid within [GRACE_PERIOD] days after due shall accrue a late charge equal to [LATE_FEE]% of the overdue amount plus interest at the lesser of eighteen percent (18%) per annum or the maximum rate permitted by Applicable Law.
[// GUIDANCE: Consider inserting ACH/automatic withdrawal language to minimize payment disputes.]
5. USE OF PREMISES; COMPLIANCE WITH LAWS
5.1 Permitted Use. Tenant shall use the Premises solely for [DESCRIBE_BUSINESS_USE] and for no other purpose without Landlord’s prior written consent.
5.2 Prohibited Uses. Tenant shall not: (a) commit waste or create nuisance; (b) permit any dangerous, illegal, or offensive activity; (c) store or dispose of Hazardous Materials except as incidental and customary to the Permitted Use and in strict compliance with Environmental Laws.
5.3 Compliance With Laws. Tenant, at its sole cost, shall comply with all Applicable Laws, including without limitation South Dakota’s commercial eviction statutes and regulations governing health, safety, accessibility, and environmental protection.
5.4 Signage. Subject to Landlord’s prior written approval and all municipal requirements, Tenant may install signage identifying its business; provided, Tenant shall remove all signage and repair any damage at the Expiration Date.
5.5 Governmental Action. If any governmental authority requires alteration of the Premises due to Tenant’s specific use, Tenant shall bear all associated costs.
6. REPRESENTATIONS AND WARRANTIES
6.1 Mutual Representations. Each Party represents and warrants that:
a) it is duly organized, validly existing, and in good standing under the laws of its state of formation;
b) it has full power and authority to enter into and perform this Lease; and
c) the execution and performance of this Lease have been duly authorized and will not violate any agreement binding upon it.
6.2 Landlord Representations. Landlord further represents that:
a) it owns fee simple title to the Property, free and clear of liens other than those disclosed on Exhibit D;
b) to Landlord’s knowledge, no written notice of violation of Applicable Law relating to the Property is outstanding that has not been cured.
6.3 Tenant Representations. Tenant represents that:
a) it has reviewed the physical condition of the Premises and accepts same “AS-IS,” subject to Landlord’s obligations expressly stated herein;
b) it is not relying on any statement or representation of Landlord not expressly set forth in this Lease.
6.4 Survival. All representations and warranties shall survive the execution and delivery of this Lease and, as to matters first arising during the Term, shall survive the Expiration Date for a period of [SURVIVAL_PERIOD] months.
7. COVENANTS AND RESTRICTIONS
7.1 Affirmative Covenants of Tenant. Tenant shall:
a) pay all Rent when due;
b) keep the Premises clean, safe, and sanitary;
c) maintain in full force all insurance required under Section 9;
d) promptly notify Landlord of any condition that poses a threat to person or property.
7.2 Negative Covenants of Tenant. Tenant shall not:
a) use the Premises for residential or overnight lodging;
b) allow liens to attach to the Property;
c) make structural alterations without Landlord’s prior written consent, not to be unreasonably withheld.
7.3 Landlord Covenants. Landlord shall maintain the structural components and roof of the Building and the common areas in good order and repair, except that costs thereof shall be passed through to Tenant as Operating Expenses except to the extent caused by Landlord’s gross negligence or willful misconduct.
8. MAINTENANCE, REPAIRS, AND ALTERATIONS
8.1 Tenant’s Obligations. Tenant, at its sole cost, shall maintain and repair the Premises (including HVAC exclusively serving the Premises), ordinary wear and tear excepted.
8.2 Landlord’s Obligations. Landlord shall maintain: (a) foundation, exterior walls, and roof; (b) parking and common areas; and (c) utility lines outside the Premises. Costs shall be included in Operating Expenses subject to Section 4.3.
8.3 Alterations. Except for non-structural alterations not exceeding $[MINOR_ALTERATION_COST] in any 12-month period, Tenant shall obtain Landlord’s prior written consent before making any alterations or improvements. All alterations shall be performed in a good and workmanlike manner and in compliance with Applicable Law. Alterations (other than Tenant’s trade fixtures) shall become Landlord’s property upon installation.
8.4 Surrender. On the Expiration Date, Tenant shall surrender the Premises broom clean and free of debris, repair any damage, and remove Tenant’s personal property.
9. INSURANCE
9.1 Tenant Insurance. Tenant shall maintain at its sole cost:
a) Commercial General Liability insurance with limits of not less than $[CGL_LIMIT] per occurrence and $[AGGREGATE_LIMIT] aggregate, naming Landlord and Landlord’s mortgagee as additional insureds;
b) Property insurance covering Tenant’s personal property and leasehold improvements on a special form (all risk) basis at full replacement cost;
c) Workers’ Compensation insurance as required by law; and
d) Business interruption insurance covering at least [MONTHS_COVERED] months of Rent.
9.2 Landlord Insurance. Landlord shall maintain property insurance on the Building in an amount not less than [INSURANCE_PERCENTAGE]% of full replacement cost (exclusive of foundations and land).
9.3 Certificates. Each Party shall deliver certificates of insurance within ten (10) days after the Effective Date and upon renewal.
9.4 Insurance Adjustments. All insurance policies shall be issued by carriers rated A- (VII) or better by A.M. Best and shall provide at least thirty (30) days’ prior written notice of cancellation or material change.
10. INDEMNIFICATION; LIABILITY ALLOCATION
10.1 Tenant Indemnity. To the fullest extent permitted by law, Tenant shall indemnify, defend, and hold harmless Landlord, its affiliates, and their respective officers, directors, members, managers, employees, and agents (“Landlord Indemnitees”) from and against any and all claims, losses, liabilities, damages, costs, and expenses (including reasonable attorneys’ fees) arising out of or relating to:
a) Tenant’s use, occupancy, or operations in the Premises;
b) the negligence or willful misconduct of Tenant or its agents;
c) any breach by Tenant of this Lease; and
d) violation of Applicable Law by Tenant, except to the extent caused by the negligence or willful misconduct of any Landlord Indemnitee.
10.2 Landlord Indemnity. Landlord shall indemnify, defend, and hold harmless Tenant and Tenant’s officers, directors, members, managers, employees, and agents from and against claims arising from Landlord’s gross negligence or willful misconduct.
10.3 Limitation of Liability. Except for (i) indemnity obligations hereunder, (ii) damages resulting from gross negligence or willful misconduct, and (iii) unpaid Rent, each Party’s cumulative liability to the other shall not exceed $[LIABILITY_CAP] or, if left blank, the total Base Rent payable during the initial Term.
[// GUIDANCE: South Dakota generally enforces contractual caps on liability unless unconscionable or contrary to public policy. Adjust the cap or carve-outs as negotiated.]
11. ENVIRONMENTAL MATTERS
11.1 Tenant Obligations. Tenant shall:
a) keep and maintain the Premises free of Hazardous Materials, except as necessary for the Permitted Use and in compliance with all Environmental Laws;
b) not permit any Hazardous Materials to be generated, used, treated, stored, or disposed of on the Property by Tenant or its affiliates, except in compliance with Applicable Law;
c) promptly notify Landlord in writing of any Release (as defined by Environmental Laws) or violation;
d) be responsible for all costs of investigation, remediation, and response arising from Tenant’s introduction of Hazardous Materials.
11.2 Environmental Inspections. Landlord shall have the right, upon reasonable notice, to conduct environmental assessments of the Premises and Tenant’s operations, at Tenant’s cost if such assessment reveals a violation by Tenant.
11.3 Survival. Tenant’s obligations under this Section 11 shall survive expiration or termination of this Lease.
12. ASSIGNMENT, SUBLETTING, AND TRANSFER
12.1 Landlord Consent Required. Tenant shall not assign this Lease or sublet all or any portion of the Premises without Landlord’s prior written consent, which shall not be unreasonably withheld, conditioned, or delayed, subject to the terms of this Section.
12.2 Permitted Transfers. Notwithstanding Section 12.1, Tenant may assign this Lease or sublet the Premises, without Landlord’s consent, to: (a) an affiliate controlling, controlled by, or under common control with Tenant; or (b) a successor by merger, consolidation, or sale of substantially all of Tenant’s assets, provided that (i) Tenant gives Landlord at least thirty (30) days’ prior written notice, (ii) the transferee has a tangible net worth at least equal to that of Tenant as of the Effective Date, and (iii) the transferee assumes in writing all of Tenant’s obligations.
12.3 Continuing Liability. No assignment or sublease shall release Tenant from its obligations unless Landlord expressly so agrees in writing.
12.4 Excess Rent. Fifty percent (50%) of any “Excess Rent” (i.e., rent or other consideration received by Tenant from an assignee or subtenant exceeding the Rent payable hereunder, after deducting reasonable leasing costs) shall be payable to Landlord as Additional Rent.
12.5 Prohibited Transfers. Any change of control of Tenant that results in transfer of more than fifty percent (50%) of voting equity interests shall constitute an assignment for purposes of this Section.
13. DEFAULT AND REMEDIES
13.1 Events of Default. Each of the following shall constitute an “Event of Default”:
a) Failure to pay any Rent within five (5) days after written notice of delinquency;
b) Failure to perform any non-monetary obligation within thirty (30) days after written notice (or such longer period as is reasonably required provided Tenant begins cure within such 30-day period and diligently prosecutes the cure);
c) Abandonment or vacation of the Premises;
d) Filing of bankruptcy or insolvency proceedings by or against Tenant that are not dismissed within sixty (60) days;
e) Assignment or sublease in violation of Section 12.
13.2 Landlord Remedies. Upon any Event of Default, Landlord may, at its option:
i) Terminate this Lease and recover possession of the Premises in accordance with South Dakota commercial eviction procedures;
ii) Terminate Tenant’s right of possession without terminating this Lease, re-enter, and relet the Premises, crediting rent received against Rent owed by Tenant;
iii) Accelerate all Rent due for the remainder of the Term then in effect;
iv) Enforce specific performance; and/or
v) Exercise any other right or remedy at law or in equity.
13.3 Landlord’s Right to Cure. Landlord may, but is not obligated to, cure Tenant’s default and charge Tenant all reasonable costs incurred plus ten percent (10%) administrative fee, payable as Additional Rent.
13.4 Attorneys’ Fees. The prevailing Party in any action or proceeding arising out of this Lease shall be entitled to recover its reasonable attorneys’ fees and costs.
14. DISPUTE RESOLUTION
14.1 Governing Law. This Lease shall be governed by and construed in accordance with the laws of the State of South Dakota, without regard to conflicts-of-law principles.
14.2 Forum Selection. Any legal action arising out of this Lease shall be commenced exclusively in the state courts located in [COUNTY_NAME], South Dakota (or, if jurisdiction is lacking, the federal court located nearest thereto), and the Parties hereby irrevocably submit to such jurisdiction.
14.3 Arbitration (Optional). If the bracket below is checked, the Parties agree to submit any dispute (other than eviction or injunctive relief) to binding arbitration administered by the American Arbitration Association under its Commercial Arbitration Rules, with a single arbitrator experienced in commercial real estate law.
[ ] Arbitration Elected [ ] Arbitration Not Elected
14.4 Jury Trial Waiver (Optional). IF PERMITTED BY APPLICABLE LAW AND IF THE BRACKET BELOW IS CHECKED, EACH PARTY WAIVES ITS RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF THIS LEASE.
[ ] Jury Waiver Elected [ ] Jury Waiver Not Elected
14.5 Injunctive Relief. Nothing herein shall impair Landlord’s right to seek injunctive or other equitable relief (including possession and eviction) to protect its interests under this Lease.
15. MISCELLANEOUS / GENERAL PROVISIONS
15.1 Entire Agreement. This Lease (including all exhibits and schedules) constitutes the entire agreement between the Parties and supersedes all prior negotiations, representations, or agreements, whether written or oral.
15.2 Amendment and Waiver. No amendment or waiver of any provision of this Lease shall be effective unless in writing and signed by the Party against whom enforcement is sought. Waiver of any breach shall not constitute waiver of any subsequent breach.
15.3 Severability. If any provision is held invalid or unenforceable, the remainder shall not be affected, and the Parties shall promptly negotiate a replacement provision reflecting the original intent.
15.4 Force Majeure. Neither Party shall be liable for failure to perform its obligations (other than payment of Rent) due to events beyond its reasonable control, including acts of God, governmental actions, terrorism, or pandemics, provided the affected Party gives prompt notice and resumes performance as soon as practicable.
15.5 Notices. All notices shall be in writing and delivered (a) in person; (b) by certified U.S. Mail, return receipt requested; (c) by nationally recognized overnight courier; or (d) by email with confirmation of receipt, to the addresses set forth at the beginning of this Lease (or such other address as a Party may designate). Notices shall be deemed given upon receipt or refusal.
15.6 No Partnership. Nothing herein shall be construed to create a partnership, joint venture, or agency relationship between the Parties.
15.7 Successors and Assigns. Subject to Section 12, this Lease shall bind and inure to the benefit of the Parties and their respective successors and permitted assigns.
15.8 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. Delivery of an executed counterpart by electronic means shall be equally effective as delivery of a wet-ink original.
15.9 Interpretation. The captions are for convenience only and shall not affect interpretation. The Recitals and all Exhibits are incorporated herein by reference.
16. EXECUTION BLOCK
IN WITNESS WHEREOF, the Parties have executed this Commercial Lease Agreement as of the Effective Date.
LANDLORD:
[LANDLORD_NAME]
By: _____
Name: ____
Title: _____
Date: ____
TENANT:
[TENANT_NAME]
By: _____
Name: ____
Title: _____
Date: ____
[// GUIDANCE: Consider attaching a notary acknowledgment if the Lease will be recorded, or if required by the lender or local practice.]
EXHIBIT A – Floor Plan / Premises Diagram
EXHIBIT B – Rent Schedule
EXHIBIT C – Tenant’s Pro Rata Share Calculation
EXHIBIT D – Schedule of Permitted Encumbrances (if any)
[// GUIDANCE: Review carefully for transaction-specific deal points, update placeholders, validate compliance with current South Dakota statutes and local ordinances, and seek local counsel confirmation prior to execution.]