Florida Commercial Lease Agreement

Introduction

A Florida commercial lease agreement is a contract between a landlord and a commercial tenant to use the leased property for business purposes. Once signed by both parties, the document becomes legally binding under Florida contract law. Commercial leases specify the conditions of the tenancy and each party's rights and responsibilities throughout the lease term.

Common provisions outlined in commercial lease agreements include the lease term, rent structure (base rent and percentage rent), security deposit, expense allocation (gross, modified-gross, or triple net), maintenance obligations, insurance requirements, use restrictions, and renewal options.

Florida Legal Framework

Commercial leases in Florida are governed primarily by Chapter 83, Part I of the Florida Statutes (§§ 83.001-83.251), which covers nonresidential tenancies. ^[1] Unlike Part II of Chapter 83, which provides extensive protections for residential tenants, Part I offers far fewer statutory protections for commercial tenants. As a result, most terms in a commercial lease are subject to negotiation between the parties rather than being mandated by law.

This flexibility allows landlords and tenants to customize lease terms based on the specific property, business type, and market conditions. However, it also means that tenants must carefully review and negotiate lease provisions, as they will have fewer statutory rights to fall back on compared to residential tenants.

Understanding Lease Expense Structures

One of the most important aspects of a commercial lease is understanding who pays for operating expenses such as property taxes, insurance, common area maintenance (CAM), utilities, and repairs. Commercial leases use three primary expense allocation structures:

Gross Lease (full Service Lease)

In a gross lease, the landlord pays for all operating expenses, including property taxes, building insurance, common area maintenance, utilities (in common areas), and structural repairs. The tenant pays only a single monthly rent amount that includes all of these costs. ^[2] This structure is common in office buildings or multi-tenant properties where separating operating expenses between tenants would be difficult.

**Advantages:**Predictable monthly costs for tenant; landlord manages all property expenses and maintenance.

**Disadvantages:**Higher base rent to account for landlord's expense risk; tenant has less control over operating costs.

Triple Net (Nnn) Lease

In a triple net (NNN) lease, the tenant pays for all operating expenses on top of base rent. The three "nets" are: (1) real estate taxes, (2) building insurance, and (3) common area maintenance (CAM). ^[2] This structure places all property expense risks on the tenant. Operating expenses typically include property taxes, insurance, common area maintenance, landscape maintenance, HVAC maintenance, utilities, and repairs.

**Advantages:**Lower base rent; landlord has predictable income; common in retail and industrial properties.

**Disadvantages:**Unpredictable monthly costs for tenant; tenant bears all expense increases.

Modified Gross Lease

A modified gross lease splits expense responsibilities between landlord and tenant. ^[2] This hybrid structure combines elements of both gross and triple net leases. Typically, operating expenses, property taxes, and insurance are included in the base year rent, but any increases over the base year are charged to the tenant based on their pro-rata share. The exact allocation of expenses varies by negotiation and may depend on the property type, market conditions, and tenant sophistication.

**Advantages:**Flexibility in negotiating expense responsibilities; can be tailored to specific business needs.

**Disadvantages:**More complex to administer; requires clear lease language defining each party's obligations.

Required Disclosures

Florida law requires specific disclosures for commercial lease agreements:

Radon Gas Disclosure

Florida law requires notification about radon gas to be provided on at least one document, form, or application executed at the time of, or prior to, execution of a rental agreement for any building (including commercial properties). ^[3] This requirement applies to all rental agreements in Florida, with no exemption for commercial leases.

The required disclosure language is:

"RADON GAS: Radon is a naturally occurring radioactive gas that, when it has accumulated in a building in sufficient quantities, may present health risks to persons who are exposed to it over time. Levels of radon that exceed federal and state guidelines have been found in buildings in Florida. Additional information regarding radon and radon testing may be obtained from your county health department."

Brokerage Relationship Disclosure (not Required for Commercial Leases)

Florida Statutes § 475.278 explicitly exempts commercial leases from brokerage relationship disclosure requirements. ^[4] The statute states that disclosure requirements "do not apply to...the rental or leasing of real property" except for leases with an option to purchase residential property (four units or fewer). Therefore, even if a real estate agent is involved in a commercial lease transaction, the formal brokerage relationship disclosures required for residential sales are not mandatory.

Essential Lease Provisions

Parties and Description of Premises

The lease must clearly identify:

• Landlord's full legal name and mailing address
• Tenant's full legal name and mailing address
• Property street address
• Square footage of leased space
• Type of space (retail, office, industrial, warehouse, etc.)
• Legal description or specific suite/unit number
• Common area usage rights (if applicable)

Permitted Use of Premises

The lease should specify exactly what business activities are permitted on the premises. This protects both the landlord (by ensuring appropriate use of the property) and the tenant (by defining permitted operations). ^[5] Tenants must verify that local zoning laws allow the intended business use. Landlords are generally not obligated to verify zoning compliance unless the lease specifically requires it.

Common use restrictions include:

• Specific business type (e.g., "retail clothing sales," "restaurant operations," "professional office")
• Prohibition on illegal activities
• Restriction on nuisances or activities that disturb other tenants
• Compliance with zoning ordinances and applicable laws
• Exclusive use provisions (in shopping centers, prevents landlord from leasing to competing businesses)

**Change of Use:**Tenants generally cannot change the business type or use without landlord consent. Such changes may require zoning verification and could affect other tenants' exclusive use rights.

Term of Lease

The lease must specify:

• Commencement date (when lease begins)
• Expiration date (when lease ends)
• Initial term length (e.g., 5 years, 10 years)
• Renewal or extension options (if any)
• Notice requirements for exercising renewal options
• Rent adjustment provisions for renewal terms

Rent Structure

**Base Rent:**The fixed monthly rental amount, typically stated as a dollar amount per month or per square foot per year (e.g., $20/SF/year). The lease should specify the due date (e.g., first day of each month), payment method, and where to remit payment.

**Percentage Rent:**Some commercial leases (particularly in retail) include percentage rent provisions where the tenant pays a percentage of gross sales or net sales above a certain threshold ("breakpoint") in addition to base rent. The lease must clearly define the percentage rate, calculation method (gross vs. net sales), reporting requirements, and audit rights.

**Rent Escalation:**Multi-year leases typically include rent escalation clauses such as fixed percentage increases (e.g., 3% annually), Consumer Price Index (CPI) adjustments, or fair market value adjustments at specified intervals.

Security Deposit

**Recommended Best Practice:**While not legally required, holding security deposits in a separate account is a recommended best practice that protects both parties' interests and demonstrates good faith handling of tenant funds.

Security deposit provisions should address:

• Amount of deposit (typically 1-3 months' rent)
• How deposit will be held (separate account recommended)
• Whether interest will be paid on deposit
• Conditions for deposit withholding (damages, unpaid rent, lease violations)
• Timeline for return of deposit after lease termination
• Itemization requirements for any deductions
• Whether deposit can be applied to last month's rent

Late Fees and Penalties

The lease should specify:

• Grace period (if any) after due date before late fee applies
• Late fee amount (flat fee or percentage of rent)
• Whether late fee accrues daily or per occurrence
• Interest rate on unpaid balances (if applicable)
• Whether late fees are capped
• Application of partial payments (to late fees first or to principal rent)

Default and Remedies

Florida commercial landlord-tenant law provides specific procedures for addressing tenant defaults. Understanding these statutory requirements is crucial for both parties.

Notice Requirements for Default

Florida Statutes § 83.20 establishes minimum notice periods for commercial lease evictions: ^[7]

1. Non-Payment of Rent (Monetary Default):

• 3 days' written notice required (excluding weekends and legal holidays)
• Notice must state: total amount due, deadline for payment, and that failure to pay will result in eviction
• No statutory cure period required (but lease may require longer period)
• Service by delivery of copy, or if tenant absent, by posting at premises

2. Non-Monetary Defaults (Lease Violations):

• 15 days' notice required with opportunity to cure
• Only applies to material breaches (non-material breaches require other remedies)
• Examples: unauthorized alterations, property misuse, subletting without permission
• Service method: as specified in lease, or by mail, hand delivery, or posting if tenant absent

3. Holdover Tenants:

• No advance notice required if lease has expired (landlord may initiate eviction immediately)
• If tenant holds over as month-to-month per lease terms: 15 days' notice required
• Under Florida Statutes § 83.06, landlord may demand double the monthly rent for holdover tenancy ^[8]

Landlord's Remedies Upon Default

When a tenant defaults, landlords have three primary options: ^[9]

Option 1: Terminate the Lease Entirely

• **Risk:**Under Florida law, terminating the lease may cause the landlord to lose the right to collect future rent. Once the lease is legally terminated, the tenant may argue that the landlord is only entitled to unpaid rent through the termination date, not for the remainder of the original lease term.
• Terminates all ongoing obligations of both parties
• Landlord must re-let property to mitigate damages

Option 2: Retake Possession Without Terminating Lease (Often Better)

• **Advantage:**Landlord can continue collecting "accelerated" rent or damages for the entire remaining lease term
• Lease remains in effect; tenant still liable for rent
• Landlord has duty to mitigate by attempting to re-let property
• If landlord successfully re-lets, original tenant receives credit for new rent collected

Option 3: Wait for Tenant to Cure

• Allow tenant to remedy the breach within the notice period
• Lease continues as normal if tenant cures default
• Landlord retains right to proceed with eviction if tenant fails to cure

Court Eviction Proceedings

Monetary Default (Non-Payment of Rent): ^[10]

• Expedited process under Florida Statutes § 51.011
• Tenant has 5 days to pay back rent to Court Registry to raise defenses
• If tenant fails to pay, default judgment and removal can occur quickly

Non-Monetary Default (Lease Violations):

• Standard county or circuit court process
• Tenant has 20 days to raise defenses to breach claim
• Case proceeds like any standard civil litigation

Waiver of Landlord's Rights

**Critical Rule:**Under Florida law, a landlord's acceptance of the full amount of rent past due, with knowledge of the tenant's breach by non-payment, shall be considered a waiver of the landlord's right to proceed with an eviction claim for that specific non-payment. ^[11] Acceptance includes any conduct inconsistent with reasonably prompt return of payment to the tenant.

**Practical Impact:**Landlords must be careful about accepting late rent payments after initiating eviction proceedings. Accepting payment may waive the right to evict for that particular default.

Tenant's Right to Withhold Rent

Under Florida Statutes § 83.201, when the lease places repair or maintenance obligations on the landlord and the landlord has failed or refused to perform, rendering the premises wholly untenantable, the tenant may withhold rent. ^[12]

Requirements:

1. Lease must expressly place repair/maintenance obligation on landlord
2. Landlord failed or refused to perform
3. Premises must be wholly untenantable (not just partially defective)
4. Tenant must serve written notice declaring premises wholly untenantable
5. Notice must give landlord at least 20 days to make specifically described repair
6. Notice must state that tenant will withhold rent until repair is performed

Ada Compliance and Accessibility Requirements

The Americans with Disabilities Act (ADA) imposes important obligations on both landlords and tenants of commercial properties. Understanding these requirements is essential for avoiding violations and potential penalties.

Shared Liability for Ada Compliance

**Critical Principle:**Both the landlord (property owner) and the tenant (business operator) bear legal responsibility for ADA compliance and can both be held liable for noncompliance. ^[13] The ADA places the obligation to remove barriers and provide auxiliary aids and services on both parties.

Landlord Responsibilities

Landlords are typically responsible for ADA compliance in:

• **Common Areas:**Hallways, entrances, parking lots, elevators, common area restrooms
• **Building Infrastructure:**Ramps, accessible entrances, signage directing to accessible entrances
• **Accessible Parking:**Designated spaces with proper signage, located near accessible building entrances
• **Width Requirements:**Hallways and entrances must be wide enough for wheelchair access and free of obstacles
• **Restroom Features:**Common area restrooms must have grab bars, lowered sinks, and other accessible features
• **Elevators:**If present, must be accessible and compliant with ADA regulations

Tenant Responsibilities

Tenants are typically responsible for ADA compliance within their leased space:

• **Interior Layout:**Aisles must be wide enough for wheelchair access
• **Counters and Service Areas:**Must be low enough for use by persons with disabilities
• **Tables and Seating:**In eating areas, tables must be tall enough to accommodate wheelchairs
• **Interior Design:**Must be free of barriers that limit access to disabled customers and employees
• **Reasonable Accommodations:**Provide auxiliary aids and services to customers with disabilities

Florida-Specific Requirements

All construction, alterations, and barrier removal in Florida must comply with both the federal ADA and the Florida Building Code - Accessibility. ^[14]

Existing Commercial Buildings (When Remodeled):

• Must have at least one accessible building entrance
• Signs must be posted at inaccessible entrances directing to accessible entrance
• Accessible parking areas and spaces must be close to accessible building entrances

Penalties for Non-Compliance

Failure to comply with ADA building requirements can result in significant financial penalties: ^[15]

• **First Offense:**Up to $75,000
• **Second Violation:**Up to $150,000
• In addition to fines, violators may be required to retrofit the property to meet ADA standards
• Plaintiffs may recover attorney's fees in successful ADA lawsuits

Lease Negotiation Best Practices

The ideal time to address ADA compliance is when leasing new space or renewing a lease: ^[16]

• **Request Landlord Modifications:**Tenants should request that the landlord agree in the lease to modify areas under the landlord's exclusive control (parking, walkways, entrances, common area restrooms)
• **Clear Language:**Include clear lease language defining responsibilities of landlord and tenant for ADA compliance
• **Indemnity Clauses:**While both parties remain liable to the public, indemnity clauses can shift financial risk between landlord and tenant
• **Pre-Lease Inspection:**Conduct ADA inspection before signing lease to identify needed modifications
• **Modification Rights:**Ensure lease allows tenant to make necessary ADA modifications to leased space

Insurance Requirements

Commercial leases typically require both landlord and tenant to maintain specific types of insurance. The allocation of insurance obligations varies depending on the lease structure (Gross, Modified-Gross, or Triple Net).

Typical Tenant Insurance Requirements

1. Commercial General Liability (CGL) Insurance: ^[17]

• Minimum coverage: $1,000,000 per occurrence / $2,000,000 aggregate (typical requirement)
• Covers bodily injury and property damage to third parties
• Landlord must be named as "additional insured"** on the policy**
• Protects against lawsuits from customers, vendors, or other third parties injured on premises

2. Property Insurance:

• Tenant insures personal property, trade fixtures, and tenant improvements
• Covers fire, theft, vandalism, and other casualty losses
• Amount should equal replacement value of tenant's property and improvements

3. Workers' Compensation Insurance:

• Required if tenant has employees
• Must meet Florida statutory requirements
• Covers employee injuries and work-related illnesses

Typical Landlord Insurance Requirements

1. Property/Casualty Insurance:

• Building structure coverage (fire, wind, extended coverage)
• Amount and allocation depend on lease type (see below)

2. Liability Insurance:

• Common areas coverage
• Building owner liability

Insurance Allocation by Lease Type

Gross Lease:

• Landlord maintains all property and liability insurance for building
• Insurance costs built into tenant's rent
• Tenant still maintains own CGL, property, and workers' comp insurance

Triple Net (NNN) Lease:

• Tenant pays for all building insurance OR reimburses landlord for tenant's pro-rata share
• Landlord typically maintains the policies but passes through 100% of cost to tenant(s)
• Tenant also maintains own CGL, property, and workers' comp insurance

Modified Gross Lease:

• Negotiated split of insurance costs between landlord and tenant
• Common arrangement: landlord pays base year amount, tenant pays increases
• Specific allocation should be clearly defined in lease

Certificate of Insurance Requirements

Leases typically require tenants to provide:

• Certificate of insurance to landlord before occupying premises
• Certificate must show landlord as additional insured
• Certificate must include minimum coverage amounts specified in lease
• Renewal certificates required before policy expiration (typically 30 days' notice)
• Insurance company must have minimum financial rating (e.g., A.M. Best rating of A- or better)
• Lease may require 30-60 days' notice of cancellation or non-renewal

Assignment and Subletting

Unless the lease prohibits or restricts, tenants may generally assign their lease or sublet the premises. However, most commercial leases include provisions requiring landlord consent for any assignment or sublease. ^[18]

Definitions

**Assignment:**A transfer of the tenant's entire interest in the lease to another party (the "assignee"). The assignee steps into the tenant's shoes and assumes all rights and obligations under the lease. In a true assignment, the original tenant typically is released from further lease obligations (though many leases require the original tenant to remain liable as a guarantor).

**Subletting:**A transfer of less than the tenant's entire interest (e.g., leasing a portion of the space, or leasing for less than the full remaining lease term). The original tenant (now "sublandlord") retains the lease and remains primarily liable to the landlord. The subtenant pays rent to the original tenant, who continues paying rent to the landlord.

Typical Lease Provisions

Landlord Consent Required:

• Most leases state: "Tenant shall not assign, sublet, or otherwise transfer this lease without Landlord's prior written consent"
• Many leases add: "such consent shall not be unreasonably withheld, conditioned, or delayed"
• Landlord may require review of assignee/subtenant's financial statements, credit history, and business plan

Reasonable Grounds for Withholding Consent:

• Proposed assignee/subtenant has poor credit or financial history
• Proposed use conflicts with other tenants' exclusive use provisions
• Proposed use violates zoning laws or increases landlord's insurance costs
• Proposed tenant would operate competing business (in shopping centers)

Recapture Rights:

• Some leases give landlord the right to "recapture" the space if tenant requests to assign or sublet
• Landlord can terminate the lease and re-let the space directly
• Protects landlord from being stuck with undesirable tenant while original tenant profits

Profit Sharing:

• If tenant assigns or sublets at higher rent than original lease, landlord may require sharing of profit
• Common provision: "Tenant shall pay Landlord 50% of any rent received above the current base rent"

Florida Law on Assignment and Subletting

Florida does not have specific statutes governing commercial lease assignments. General contract law principles apply. Courts enforce written assignment and subletting restrictions as written in the lease. If the lease is silent on assignment/subletting, the tenant generally has the right to assign or sublet without landlord consent (though this is rare in modern commercial leases).

Practical Considerations

For Tenants:

• Negotiate for reasonable consent language before signing lease
• Be aware that assignment may not release you from liability (depends on lease terms)
• Budget time for landlord approval process (can take 30-60 days)
• Consider negotiating limits on recapture rights

For Landlords:

• Clearly define consent process and timeline in lease
• Specify information required from proposed assignee/subtenant
• Consider including recapture rights to maintain control of tenant mix
• Require original tenant to remain liable as guarantor even after assignment

Environmental Compliance and Hazardous Materials

Commercial leases must address environmental compliance obligations and restrictions on hazardous materials use. Both federal and Florida state law impose liability for environmental contamination, and lease provisions typically allocate these risks between landlord and tenant. ^[19]

Hazardous Materials Restrictions

Most commercial leases include provisions similar to:

• **Prohibition:**Tenant shall not store, use, generate, manufacture, or dispose of any hazardous materials on the premises without landlord's prior written consent
• Definition:"Hazardous materials" typically defined by reference to federal/state environmental laws (CERCLA, RCRA, Florida Chapter 376)

• **Compliance:**Tenant must comply with all applicable environmental laws regarding storage, use, and disposal

Tenant Environmental Obligations

Typical tenant obligations include:

• **Compliance with Environmental Laws:**Comply with all federal, state, and local environmental laws, regulations, and ordinances
• **Proper Waste Disposal:**Dispose of all waste properly through licensed waste haulers; maintain records of disposal
• **Spill Notification:**Immediately notify landlord of any spills, releases, or contamination
• **Cleanup Responsibility:**Remediate any contamination caused by tenant's operations at tenant's expense
• **Indemnification:**Indemnify landlord for environmental violations, contamination, or cleanup costs caused by tenant

Landlord Disclosure Obligations

While Florida law does not mandate environmental disclosures for commercial properties in the same way as residential properties, prudent landlords should disclose:

• Known environmental contamination on or affecting the property
• Prior industrial or manufacturing uses that may have caused contamination
• Presence of underground storage tanks (active or abandoned)
• Asbestos-containing materials (buildings constructed before 1980)
• Lead-based paint (buildings constructed before 1978)
• Any pending or threatened environmental enforcement actions

Relevant Environmental Laws

Federal Laws: ^[20]

• **CERCLA (Comprehensive Environmental Response, Compensation, and Liability Act):**Also known as "Superfund," imposes strict liability on current and former property owners for contamination, even if they did not cause it. Both landlords and tenants can be held liable.
• **RCRA (Resource Conservation and Recovery Act):**Governs generation, transportation, treatment, storage, and disposal of hazardous waste
• **Clean Water Act:**Regulates discharge of pollutants into waters of the United States
• **Clean Air Act:**Regulates air emissions from stationary and mobile sources

Florida State Laws: ^[21]

• **Florida Statutes Chapter 376 (Pollutant Discharge Prevention and Removal):**Governs discharge of pollutants and contamination cleanup; imposes strict liability on responsible parties
• **Underground Storage Tank Regulations:**Florida requires registration, monitoring, and eventual closure of underground storage tanks
• **Asbestos Regulations:**Florida Department of Health regulates asbestos abatement and disposal

Practical Guidance

For Tenants:

• Conduct Phase I Environmental Site Assessment before signing lease (especially for industrial/manufacturing properties)
• Negotiate for landlord's representations about environmental condition
• Seek indemnification from landlord for pre-existing contamination
• Maintain documentation of proper waste disposal practices

For Landlords:

• Disclose known environmental issues to avoid fraud/misrepresentation claims
• Require tenant to provide environmental compliance reports periodically
• Reserve right to inspect premises for environmental compliance
• Consider environmental insurance to protect against unknown contamination