Commercial Lease Pro

R. Sebastian Gibson asked:


In these difficult economic times, as more and more people are forced to walk away from their homes and lease a home or apartment until the economy turns around, it becomes important again to know some of the rules regarding leases in California.

If you live in any of the cities in the Coachella Valley including Indian Wells, Palm Springs, Palm Desert, Cathedral City, Yucca Valley, Joshua Tree, Rancho Mirage, Desert Hot Springs, Twentynine Palms, Thermal, Indio, Coachella, La Quinta or in Orange County, San Diego or the Inland Empire in the cities of La Jolla, Del Mar, Encinitas, Carlsbad, Oceanside, San Marcos, Vista and Escondido, Huntington Beach, Westminster, Buena Park, Anaheim, Santa Ana, Costa Mesa, Irvine, Newport Beach, Corona del Mar, Laguna Beach, San Clemente, San Juan Capistrano, Yorba Linda, Fullerton, Ontario, Rancho Cucamonga, Riverside, San Bernardino, or Temecula and if you ever lease a home, here is some basic legal information about leases. 

The Statute of Frauds in California requires that a lease for more than a year must be in writing. Consequently, an oral agreement for a rental period of a year or less is still valid where the parties intended to create such a lease.

Here’s the tricky part to all of this. If the parties verbally agree to a year’s lease before the lease goes into effect, the oral agreement is invalid as the lease will expire more than a year after the lease was made.

The minimum legal components of a lease are a statement of the parties, a description of the property, the duration of the lease, the amount of the rental, and the time and manner of the rental payment.

Leases usually require a great more than just those terms however. What extra terms are included are up to the parties. The failure to contain other elements does not cause the lease to be invalid. However, if the tenant is required to waive his legal rights as to security deposits, litigation, notices of hearings, suing the landlord or a landlord entering the premises, such waivers are generally void and can be attacked as contrary to public policy.

Security deposits are a matter of real estate regulation. Landlords of residential (as opposed to commercial) property are limited to requiring a security deposit of two month’s rent for unfurnished property and three month’s rent for furnished property.

A landlord can increase the security deposit by one-half a month’s rent for a waterbed, but when was the last time anyone saw a waterbed?A landlord can also require that the first month’s rent be paid in advance. If the lease states that late charges will be imposed for late payment of the rent, late charges are legal. Courts have held 1 ½ percent to be legal and 20 percent to be excessive.

Landlord-tenant law is in many respects far more complex than basic contract law. The handbooks on landlord and tenant law are extensive and the statutory regulations are many.

On top of that, the rules regarding leases differ dramatically between residential and commercial leases.

When seeking the advice of an attorney regarding a commercial lease, it is helpful to hire an attorney who is also a commercial real estate broker or Realtor as such an attorney may also have additional experience in the practical aspects of commercial real estate leases.

Maribel Roncales asked:


A commercial lease agreement is a contract that legally binds the property owner and the tenant. The lease agreement gives the tenant the right to use the property for commercial purposes for a certain period in exchange for money paid to the property owner.

The lease agreement also provides an outline of rights and responsibilities of both the tenant and the proprietor.

What is the subject of the commercial lease agreement?

Commercial lease agreement involves the lease of real property for commercial purposes. It usually covers the lease of a store, offices, industrial and commercial buildings.

Is there a standard form for Commercial Lease Agreement?

Unlike other contracts, commercial lease agreement has no standard or required form. The law is silent with regard to this aspect. The party can use any form as long as the basic element of the lease agreement are present.

What are the basic elements of commercial lease agreement?

• Property address

• Start and termination dates

• Names of all parties involved including their signatures

• Rental amount and complete detail of all deposits

• The names of the landlord and tenants and other parties involved and their signatures

• Interval of payment

• Provision of lease renewal

What is the difference between commercial leases from a residential lease agreement?

A commercial lease differs from residential lease on its purpose. Commercial lease is used by a tenant to rent space for business purpose while a residential lease is used by a tenant to rent a home or space to reside in. The parties in a commercial lease agreement have a greater negotiating and bargaining power from the parties in a residential lease agreement.

Is oral lease agreement sufficient?

An oral lease agreement is sufficient and valid between the parties. However, it does not bind third persons.

Courts also prohibit oral lease agreement because it is difficult to enforce. In cases of dispute, courts have no reference as to the contents of the agreements.

It is had to determine who the party at fault is.

Is there a maximum period for lease agreement?

The lease agreement may exist for any length of time. It may be for a short period, which will last for a year or less and for a long term to last for three years or more.

A long-term lease tenant is required to pay periodic increases in their monthly rent. The increases are provided as compensation for owner due to rising amount of insurance, property taxes, common maintenance and other utilities.

Parties in a Lease Agreement

A lease agreement has two parties such as,

• The lessor or the property owner

• The lessee or the tenant

The lessor is the owner of the property and the lessee is the one who uses the property for a certain period in exchange for a compensation called rent.

What law governs commercial agreement?

Since commercial lease agreement involves real property, the law of the place where the property is located will governed.

The commercial lease agreement is governed by the law of the place where the property is located, regardless of the jurisdiction of which jurisdiction the property owner and tenant resides.

If you have encountered any legal problems regarding your Commercial Lease Agreement, do hesitate to consult our expert Los Angeles business lawyers. Just log on to our website and fill out our free case evaluation form.