Understanding Commercial Leases
As a business owner, you understand the intricacies of your industry and trade. You understand what you are looking for in a commercial property and how you can expand your business. However, you may not fully grasp all the legal jargon and terms of a commercial lease agreement. A lease is a sizable business expense and for that reason, it is important to know exactly what you are signing.
Here is a list of common terms you will come across in a commercial lease and their meanings:
Lessor
A lessor is the title holder or owner of a leased property, commonly referred to as the landlord. They could also be a referred to as a lender with financial institutions like banks.
Lessee
A lessee is a person or organization who is the user or renter of the leased property. Financial institutions refer to them as debtors, and in commercial real estate, the lessee may be known as the tenant.
Domicilium Citandi Et Executandi
Domicilium citandi et executandi is a Latin term that refers to the specific address (that is named by one party) where legal notices or communication can be sent. The responsibility then falls on that party to inform other signatories of changes to this address.
Pro Rata
Pro rata is a Latin term that translates to ‘ a portion of’. This term refers to an allocation of costs on the basis of a common calculatable factor.
Remission of Rent
Remission of rent is a situation in which the tenant withholds, suspends or reduces the amount of rent paid. As a tenant, it is important to familiarise yourself with the by-laws of rental remission as in certain circumstances it is seen as an offence.
Sub-Lett/Sub-Letting
Sub-letting is the process of either leasing a property to/ or renting a property from a person who is renting the property from someone else.
Mutatis Mutandis
Mutatis mutandis is a legal Latin term that translates to “the necessary changes having been made". This term applies to a situation where two or more situations are compared and alterations are made without influencing the main objective.
Public Liability Insurance
Public liability insurance is a must have for any business. This can help you to protect your assets from a variety of risks, such as incidents that may occur on your business premises. This form of insurance is often a prerequisite in a lease.
Town Planning Scheme
This refers to the specific zoning and land use allocations that apply to a certain building and the regulations regarding its use.
Conflagration
This is a term for a substantial fire, that damages or destroys the majority of the commercial property rented.
Casus Fortuitus
Casus fortuitus is another legal Latin term, which is defined as an uncontrollable accident, fortuitous case or happening. Also known in layman's terms as an act of God.
Deed of Suretyship
A deed of suretyship is a type of security given by a tenant/lessee to a landlord/lessor - in terms of a surety/third person, who undertakes to carry the tenant’s financial burden if they are unable to.
In Solidum
In solidum is a term referring to an entire sum or the entirety as a whole.
For this and more quality commercial real estate advice or to get a better understanding of the commercial real estate lease, contact Kandar Group today.
