Commercial real estate such as office buildings, shops, and commercial complexes typically have a longer lease term, ranging from 5 to 15 years. Compared to residential leasing, commercial real estate leasing has a higher rent, and tenants often need to invest in larger decoration costs before entering the premises. Commercial real estate leasing contracts are the code of conduct for lessors and lessees over a long period of time, and the terms of the contract are closely related to the commercial interests of both parties. Both the previous Contract Law of the People's Republic of China and the current Civil Code of the People's Republic of China (hereinafter referred to as the "Civil Code") have outlined the key issues of the lease contract. Although some local government departments have provided exemplary lease contract templates, the specific terms of a lease contract generally depend on the autonomy of the parties to the contract.

In practice, commercial real estate leasing contracts are usually provided by owners, which is conducive to protecting the rights of owners. Especially for high-quality commercial real estate, due to its scarcity in the market, owners may have more power in contract negotiation. Of course, owners also hope to lease to lessees with good reputation and larger scale, and may make concessions to some terms depending on market conditions. Therefore, for the lessee, it is necessary to comprehensively review and strive for rights as much as possible. As the lessee needs to be responsible for the management and maintenance of the leased property after handover, its obligations under the lease contract may be more complex and detailed.

Given the complexity of commercial real estate lease contracts, it is quite necessary to entrust lawyers to participate in contract negotiations. Lawyer Gao Peng has repeatedly assisted clients in negotiating and signing complex commercial real estate lease contracts. This article aims to summarize the key terms of commercial real estate lease contracts from the perspective of the lessee and provide suggestions based on legal provisions and lawyers' practical work experience.

In combination with the practice of reviewing commercial real estate lease contracts, the following key clauses may require attention.

1. Scope of lease purpose

The purpose of the lease is one of the usual provisions of a lease contract as stipulated in Article 704 of the Civil Code. The lessee's use of the leased property is limited by the lease purpose agreement. If the lessee exceeds/violates the lease purpose, it may constitute a material breach of contract, thereby facing the risk of compensation, or even the lessor terminating the lease contract. The agreement on the use of a property lease should first comply with the use listed in its ownership certificate, and such uses may be relatively broad. If the lessee has special needs, it is recommended that the purpose should be specified accordingly when the contract is concluded to avoid subsequent disputes. If subsequent uses may be adjusted or expanded, care should be taken to leave room for necessary adjustment and expansion, and it is not advisable to limit the scope of use too narrowly in the agreement.

2. Grant and cancellation of rent-free period

Due to the inability of the lessee to use the leased property during the renovation period, the lessor usually provides the lessee with a certain rent-free period, but the lessor may agree on some situations where the rent-free preference is revoked. For example, if the lessee terminates the lease in advance, the lessor requires the lessee to pay the rent corresponding to the rent-free period normally, thereby reducing its rental losses; And increase the default cost of the lessee. Therefore, it is recommended that the lessee first combine their own decoration needs to strive for a certain rent free period and reduce the rental cost. Secondly, based on the possibility of early termination of the lease by the lessee, assess the risk of canceling the rent-free period, do not agree on the cancellation situation, or try to limit the agreement on the cancellation situation.

3. Payment of deposit/security deposit

Commercial real estate lease contracts typically stipulate a certain deposit/security deposit, such as a 6-month rent, to offset the property, water, electricity, and other expenses that the lessee owes during the lease period, or losses, and generally stipulate that the lessor has the right to directly deduct relevant expenses from the deposit/security deposit. The lessee can reduce the risk of the lessor's arbitrary deduction of the deposit/security by limiting the amount, deduction scope, and duration of the deposit/security, and increasing the right to know.

4. Restrictions on decoration

Commercial real estate leasing contracts generally impose necessary constraints on the lessee's decoration behavior, including but not limited to requiring the lessee's decoration plan to obtain the consent of the lessor and obtain necessary government approval procedures. Due to the fact that the lessor does not directly participate in or manage the renovation activities after handing over the property, the renovation clauses usually impose certain restrictions on the lessee's renovation activities to avoid damaging the property. The lessee needs to pay attention to the fact that the lessor's rights under the decoration clause should not be too broad, in order to avoid unnecessarily increasing their costs or causing contract disputes with the decoration unit. For those involving government approval, the lessee may require the lessor to cooperate; The lessee may agree to assume the liability for compensation for the damage caused by the behavior of the decoration construction unit.

5. Division of maintenance responsibilities

According to Article 712 of the Civil Code, lessors generally have the obligation to maintain the leased property, but the law also allows both parties to agree separately on the maintenance. The lessor may only ensure that the transferred property complies with basic laws and regulations, and require the lessee to bear the maintenance during the lease period. It is recommended that the lessee strive to have the lessor bear the maintenance responsibility as much as possible. If this goal cannot be achieved, the maintenance responsibilities of both parties can be carefully agreed and divided based on their actual needs to avoid future disputes.

6. Definition and cost of restitution

Due to the long lease cycle of commercial real estate and the different requirements that each lessee may have for decoration, commercial real estate lease contracts generally require the lessee to restore the property to its pre delivery state at the end of the lease term. First of all, the lessee should pay attention to the fact that the contract should have a clear definition of the status quo ante, in order to avoid disputes during the handover between the two parties. Secondly, in cases where the lessor restores the original state on behalf of the lessee but the lessee bears the relevant costs, it is possible to seek to clarify the cost of restoring the original state in advance to avoid the risk of excessive costs.

7. Enjoy the right of first lease

Article 734 of the Civil Code stipulates the lessee's priority to lease, but the relevant provisions are more general. In practice, both parties to the contract may make further agreements on the priority lease right, including but not limited to setting a deadline, preconditions, etc. The lessee needs to pay attention to reserving a reasonable period of time for timely relocation if the renewal fails to materialize; Minimize the preconditions for enjoying the priority lease right. For example, it can be stipulated that the priority lease right can be automatically enjoyed when there is no material breach of the commercial real estate lease contract.

8. Balance of liability for breach of contract

In the case of commercial real estate leasing contracts provided by lessors, the contractual provisions on the lessee's liability for breach of contract are often more detailed, while the provisions on the lessor's liability for breach of contract are relatively simple, and may limit the circumstances of breach of contract. It is recommended that the lessee pay attention to the agreed amount of liquidated damages for late payment and avoid excessively high liquidated damages. From the perspective of the lessee, the main default situation of the lessor may be early termination of the lease contract. It is recommended that the lessee can avoid the lessor's easy early termination of the lease contract by increasing liquidated damages, loss compensation, and other arrangements.
To sum up, in the negotiation of commercial real estate lease contracts, if conditions permit, the lessee can actively propose to use templates that are beneficial to itself. If this goal is not achieved, it should also strive to use contract templates that balance the rights and obligations of both parties as much as possible; In addition, the contract terms should be fully and carefully reviewed, and if conditions permit, actively strive for rights and refine the relevant content of the agreement, so as to reduce and avoid the risk of disputes in the subsequent performance process.

Statement: This article does not constitute legal advice. If you have legal questions, please contact the author.