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which type of lease agreement do i need?

1,282 Views | 8 Replies | Last: 4 yr ago by sts7049
sts7049
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AG
i recently purchased a small piece of property on which sits a small business owned by a close family friend.

the previous owner of the land didn't have any formal lease agreement with the business owner...they had a sort of friendly arrangement for rent and there were never any issues. now that i've bought the land, the business owner would like to set up something more formal with me (as would i to minimize any issues).

i'd still like to keep this simple if possible. in this situation should i use the standard tx commercial lease agreement form?
flown-the-coop
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AG
sts7049 said:

i recently purchased a small piece of property on which sits a small business owned by a close family friend.

the previous owner of the land didn't have any formal lease agreement with the business owner...they had a sort of friendly arrangement for rent and there were never any issues. now that i've bought the land, the business owner would like to set up something more formal with me (as would i to minimize any issues).

i'd still like to keep this simple if possible. in this situation should i use the standard tx commercial lease agreement form?
Run a small business for past 10 years and we have had probably 5 different leases for office space, all from sole proprietor / land owner lessors and we have always used to the standard form.

Only points of contention have ever been in regards to repair of mechanical systems (i.e. HVAC) and any improvements we needed to make to property, typically around cell boost equipment as metal buildings and cellphones are not good bedfellows.

I would use the standard, then make the appropriate selections to cover items above, then agree on terms, deposit, notice of termination by either parties.
sts7049
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AG
thanks for the input.

as far as the building is concerned, that is totally owned by the business owner. the only thing that's mine is the land, but to your point probably we just need to have that clear in the lease.
flown-the-coop
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Is the building movable? I would have heartburn over a permanent structure owned by someone else sitting on my land. If its permanent, who pays property taxes on the improvement? Would think you would also need to cover access to structure (i.e. a right of way) and any agreed utilities provided.

If they have a trailer to temp building on your land, then you may want to look into a lease similar to what an RV park would have.
Sub4
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AG
If you already have the tenant and just need some advice on writing a lease. I would suggest reaching out to a Commercial Broker in your area for a predetermined small flat fee where you can lean on their experience. Paying a couple of hundred bucks or whatever you could agree upon is probably worth the price to have a strong lease that works in your best interest.
Bitter Old Man
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AG
Commercial Brokers aren't legally allowed to give you advice on writing a lease. If they do, they can lose their license and potentially be prosecuted.

OP - find a real estate lawyer and get some advice. They know stuff you don't, and the form contract is fine, until something goes wrong.
Ribeye-Rare
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AG
sts,

Regardless of which written lease terminology you choose, I suggest that you shouldn't let anyone run a business on a property you own without their purchasing a Commercial General Liability Insurance policy that names you as an "additional insured."

The last thing you need is for someone to get hurt on this property followed by the injured party's attorney including you in the lawsuit. You're probably not making much in rent, and you sure don't need that hassle for the small potatoes you get in return.

My commercial leases include these type of insurance and indemnity provisions. Some would refer to them as 'landlord-friendly' leases, and they are. So be it.

If the guy balks at buying insurance to protect both him and you, it may be time to show him the door.

As long as he isn't doing anything super-dangerous, it shouldn't cost that much.

Just my 2 cents based on my experience in leasing older commercial/industrial buildings. And, BTW, buy yourself some General Liability insurance. That will protect you when they claim you were negligent somehow when the guy got hurt.

Good luck.
Agilaw13
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This situation looks ripe for issues. Since you own the land and the tenant owns the building, what is the current term of the lease agreement? Does the tenant have exclusive rights to all the land or just a portion? Is there a parking lot/area? If so, who maintains it? When the lease agreement ends, what happens to the building; can tenant just move it or tear it down? Liability insurance to cover you a must.
sts7049
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AG
thanks for the other comments here. to answer a few questions...

-the building is technically movable, but i think it's been in place at least 7 or 8 years.
-whatever utilities are in use have been set up long ago by the business owner. basically, the previous owner of the land just gave her the spot to plop the building and that's it. there is a small parking area just for ~3 cars right off the main road.
- i'm fairly sure that the business owner does not currently have any liability insurance, but i'll ask her about it. i suspect not because the previous land owner never mentioned anything about it during our transaction and up to now the BO's never mentioned it to me either. i am hesitant though to include a clause about that in the lease to require them to obtain it although i understand why it would be important. if i obtained my own liability policy would that be enough to cover myself?

sts7049
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AG
there is no current lease agreement. as i mentioned above, the previous owner of the land never had anything set up. it was just kind of a friendly arrangement...business pays agreed monthly rent, and that was it.

the building is the business owners. if the lease were to end, the building would be taken away.
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