Key Clauses in Commercial Property Tenancy Agreements

Key Clauses in Commercial Property Tenancy Agreements
A well-drafted tenancy agreement is essential for ensuring smooth landlord-tenant relationships and safeguarding the interests of both parties in commercial properties. Here are some crucial clauses that should be included:
- Property and Parties Information
Accurate details about the property and the parties involved are critical for the enforceability of a tenancy agreement. When dealing with a tenant who is a company, it is prudent to require a personal guarantee from the directors as additional security for the tenant’s obligations.
- Rental and Deposit
The details of rental and deposit arrangements are vital. Clearly state the monthly rental amount, the due date for payments, and the deposit required. Ambiguity in these details can lead to disputes, particularly concerning late payment interest and outstanding payments.
- Option to Renew
Security of tenure is crucial for commercial tenants to ensure business continuity and protect investments in renovations. A well-crafted renewal option clause can provide this security, preventing disruptions to business operations.
- Use of Premises
The tenancy agreement should explicitly state the intended use of the premises and the nature of the tenant’s business. Any changes in use should require the landlord’s approval to avoid conflicts and ensure compliance with regulations set by local authorities.
- Maintenance and Repair
Responsibilities for property maintenance and repairs should be clearly outlined to prevent disputes. Specify which party is responsible for maintaining various parts of the property to avoid confusion and potential legal issues.
- Other Duties and Responsibilities
Include clauses that specify additional responsibilities of the tenant, such as:
- Insuring the premises against fire damage
- Paying service charges and utilities
- Obtaining the necessary business licenses and permits for premises and signboards
- Consequences of Premature Termination by Tenant
Premature termination can occur due to unilateral action or default by one party. The agreement should clearly state that the defaulting party, usually the tenant, is liable for the rental of the unexpired term. Alternatively, the tenant may be required to find a replacement tenant acceptable to the landlord to mitigate losses.
- Renovation During Tenancy
Tenants should be prohibited from making renovations without the landlord’s approval to prevent unauthorized alterations that could damage the property’s structure. This clause protects the landlord’s property and maintains the property’s integrity.
- Subletting of the Premises
The agreement should address subletting explicitly. If subletting is part of the tenancy’s purpose, it should be clearly stated. From the landlord’s perspective, a clause prohibiting subletting without approval is essential to control who occupies the property and to prevent potential legal and financial issues.
Conclusion
There are many more clauses that should be included in a tenancy agreement, a well crafted tenancy agreement helps clarify responsibilities, protect investments, and avoid potential disputes. Properly structured agreements provide a solid foundation for a positive landlord-tenant relationship and ensure the smooth operation of the tenant’s business.
Author: Patrick Tan, Partner the firm
Disclaimer:
This article is intended for informational purposes only and does not constitute legal advice. Every situation is unique, and specific legal advice should be sought based on the particular circumstances. Readers are encouraged to contact us at info@tnhlaw.com.my if they require legal advice or have any questions regarding the content of this article.