Everything You Need to Know About Using a Restaurant Lease Agreement Template

Because the relationship between the restaurant owner and the landlord can be so complex, lease agreements are often long and difficult to understand. A restaurant lease agreement template can provide much-needed guidance, but confusion is still common. To help, we'll highlight which clauses are absolutely essential — and which might be added at the landlord or tenant's discretion.

Basics Needed for a Restaurant Lease Agreement

It is absolutely crucial that a restaurant lease agreement dive into details. By spelling out all terms of the lease, both the landlord and the tenant can obtain much-needed personal, professional, and legal protection. These basic lease agreement stipulations should help:

• Lease term. How long will the restaurant lease last? The document should clearly state when the lease becomes effective, as well as its expiration date.
• Conditions of leased premises. Prior to signing a lease agreement, the tenant should fully inspect the premises to determine whether the conditions are acceptable. Once familiarity with the property's size and conditions has been established, the tenant will agree to accept those premises as-is for the purposes of the lease.
• How the premises will be used. Once the lease begins, how will the space be used? This should be spelled out, as operations can differ significantly between various types of restaurants. This section might mention whether the business will involve catering, carryout, or retail sales of non-food products.
• Rent. This clause should explain how much the tenant will pay the landlord — and when. Depending on payment arrangements, this may be split into monthly installments or handled on an annual basis. Often, restaurant lease agreements include both a base rate and procedures for using fair market rental rates, if relevant.
• Real property taxes. A variety of arrangements can be made to ensure that real property taxes are paid on the leased space. Often, the landlord is responsible for paying these, although, in some situations, they may only cover an agreed-upon portion — or they might handle taxes for a specified amount of time before passing the obligation on to the tenant. No matter which solution is selected, it must be spelled out clearly in the lease agreement.
• Alterations to the property. Typically, landlords prefer for tenants to avoid making any significant alterations to the premises they lease — unless they obtain permission first. To that end, the lease agreement should explain when written permission is needed. For example, consent may be required before painting either the exterior of the building or the premises' interior. Tenants may also be restricted in where they can place signage.
• Repair and maintenance obligations. Often, maintenance tasks are divided between the commercial tenant and the landlord. Outline in detail when specific parties will be expected to complete certain types of repairs or maintenance activities. For example, the agreement may explain that the tenant is responsible for maintaining HVAC systems. Don't forget to explain how and when the landlord might undertake maintenance tasks on the tenant's behalf — especially when the tenant fails to abide by obligations stipulated in the agreement.

Extra Clauses Worth Adding

Leases can look dramatically different from one restaurant to the next. As such, both tenants and landlords should expect to customize any restaurant lease agreement template they use. In many cases, these clauses will need to be added:

• Definitions. The terms included in restaurant lease agreements are sometimes difficult for tenants and landlords to understand. To clarify, a definition section can be built into the document. This might include commonly confused concepts such as "force majeure" or "real property."
• Options to renew. Assuming the tenant abides by the stipulations provided in the restaurant lease agreement, what will the renewal process involve? This section should specify when renewal is warranted and whether the terms of the original contract will be maintained.
• Penalties for late rent. What happens if the tenant fails to pay the agreed-upon rent on time? Often, restaurant lease agreements include provisions outlining late fees and other penalties.

Getting the Lease Agreement Signed

Once you've done the hard work of customizing and analyzing your restaurant lease agreement, it's time to take the final step: getting the document signed. Security is essential, so it's worth your while to use a service such as Nitro Sign. Start your free trial today so you can enjoy greater peace of mind.