Arkansas Commercial Lease Agreement

Introduction

An Arkansas commercial lease agreement is a legally binding contract between a landlord and a business tenant that establishes the terms and conditions for leasing commercial real estate. These agreements govern the rental of office spaces, retail locations, industrial facilities, warehouses, and other non-residential properties used for business purposes.^[1]

Commercial leases in Arkansas typically run for longer terms than residential leases—commonly three to five years—and often include options for renewal. Unlike residential leases, commercial lease terms in Arkansas are largely governed by the contract itself rather than statutory protections, giving parties significant flexibility in negotiating terms.

Key Components of an Arkansas Commercial Lease

Parties to the Agreement

The lease must clearly identify the landlord (property owner or authorized agent) and tenant (business entity or individual). For business tenants, the legal entity name should be used exactly as registered with the Arkansas Secretary of State.

Description of Leased Premises

The agreement must include a detailed description of the commercial space, including:

• Street address of the property
• Square footage of the leased space
• Type of space (retail, office, industrial, warehouse)
• Any common areas included in the lease

Permitted Use of Premises

Commercial leases should specify exactly how the tenant may use the space. Options include allowing all legal uses or restricting use to specific business activities. Any change in the permitted use typically requires prior written consent from the landlord.

Lease Term

The lease term specifies the duration of the agreement, including the commencement date and expiration date. Commercial leases commonly run for 3-5 years with renewal options. Some agreements include rent escalation clauses that increase rent at specified intervals during the term.

Expense Structure Types

Arkansas commercial leases typically use one of three expense structures:

Triple Net Lease (Nnn)

The tenant pays base rent plus all operating expenses, including property taxes, insurance, and maintenance costs. This structure places maximum financial responsibility on the tenant.

Gross Lease

The landlord pays all operating expenses from the rent collected. The tenant pays a single, all-inclusive rent amount with no additional charges for taxes, insurance, or maintenance.

Modified Gross Lease

A hybrid structure where landlord and tenant share operating expenses according to negotiated terms. Common arrangements include the tenant paying utilities while the landlord covers property taxes and insurance.

Security Deposit

Unlike residential leases, Arkansas law does not impose statutory limits on commercial security deposits. The amount is negotiable between the parties. Commercial deposits typically range from one to three months' rent. The lease should specify:

• Amount of the security deposit
• Conditions for withholding or returning the deposit
• Whether the deposit may be applied to the last month's rent
• Interest accrual (if any)

Rent and Late Fees

Commercial leases should clearly state the base rent amount, due date, and payment method. Many commercial leases also include percentage rent provisions requiring tenants to pay a percentage of gross or net sales in addition to base rent—common in retail leases.

Late fees for commercial leases in Arkansas are not regulated by statute and are determined by the contract. Fees may be structured as:

• Flat fee per occurrence or per day
• Interest-based penalty calculated on unpaid rent

Required Disclosures

Agency Representation Disclosure

If a real estate agent is involved in the commercial lease transaction, Arkansas law requires the agent to disclose to all parties which party or parties they represent. Under Arkansas Code § 17-42-108, licensees must clearly disclose their agency relationship in every real estate transaction.^[2]

The Arkansas Real Estate Commission provides an Agency Representation Disclosure Form that agents must use to comply with this requirement.^[3]

A licensee may represent more than one party to a real estate transaction (dual agency) subject to the rules established by the Arkansas Real Estate Commission.

Ada Compliance Considerations

Commercial properties open to the public must comply with the Americans with Disabilities Act (ADA). Under federal law, both landlords and tenants may share responsibility for ensuring accessibility.^[4]

The lease should clearly allocate ADA compliance responsibilities, including:

• Responsibility for existing accessibility features
• Obligations for modifications required by the tenant's use
• Cost allocation for required improvements

Maintenance and Repairs

Commercial leases should clearly delineate maintenance responsibilities. Typical allocations include:

Landlord Responsibilities:

• Structural components (roof, foundation, exterior walls)
• Major building systems (HVAC, plumbing, electrical)
• Common areas and parking facilities

Tenant Responsibilities:

• Interior maintenance and cosmetic repairs
• Trade fixtures and equipment
• Compliance with tenant's specific use requirements

Default and Remedies

Commercial lease defaults in Arkansas are governed primarily by the contract terms. Common events of default include failure to pay rent, violation of use restrictions, and abandonment of the premises. Remedies available to landlords typically include:^[5]

• Acceleration of remaining rent
• Recovery of the security deposit
• Eviction proceedings through Arkansas courts
• Recovery of attorney's fees and costs (if provided in the lease)

Insurance Requirements

Commercial leases typically require both parties to maintain insurance coverage:

Tenant Insurance:

• General liability insurance (commonly $1,000,000 minimum)
• Business personal property coverage
• Worker's compensation (if employees work on premises)

Landlord Insurance:

• Property/casualty insurance for the building
• Liability coverage for common areas

Many leases require tenants to name the landlord as an "additional insured" on their liability policies.

Lease Termination

Commercial leases may terminate through:

• Expiration of the lease term
• Mutual agreement of the parties
• Default by either party
• Exercise of early termination option (if included)

Upon termination, the lease should address surrender of the premises, removal of tenant improvements, and return of the security deposit.