Mississippi Commercial Lease Agreement

Introduction

A Mississippi commercial lease agreement is a binding contract between a business entity (tenant) and the owner or property manager of a commercial space (landlord). This type of lease is typically used for retail stores, office spaces, warehouses, and industrial facilities. The agreement outlines all terms and conditions of the rental arrangement, including lease duration, rent amount, security deposit, expense allocation, and renewal options.

Unlike residential leases, which are governed by the Mississippi Residential Landlord and Tenant Act (Title 89, Chapter 8), commercial leases fall under Title 89, Chapter 7 of the Mississippi Code. ^[1] This distinction is important because commercial tenants have fewer statutory protections and more flexibility to negotiate lease terms.

Legal Framework in Mississippi

Commercial lease agreements in Mississippi are primarily governed by contract law principles and Title 89, Chapter 7 of the Mississippi Code. Section 89-7-27 specifically addresses nonresidential (commercial) evictions and defines the legal procedures for landlord-tenant disputes involving commercial properties. ^[2]

Key Legal Principles:

Freedom of Contract: Commercial parties have broad latitude to negotiate and customize lease terms. Unlike residential leases, there are few mandatory statutory provisions.

Good Faith and Fair Dealing: Mississippi recognizes an implied covenant of good faith and fair dealing in commercial contracts. Neither party should exploit contract terms for unfair advantage.

Written Agreement Recommended: While oral leases are technically valid for terms under one year, written agreements are strongly recommended for commercial transactions to avoid disputes.

Required Disclosures

Agency Relationship Disclosure (Conditional): When a real estate broker is involved in the transaction, they must disclose their agency relationship to all parties. This disclosure must be made on an MREC-approved form before any representation agreement is signed. ^[3]

*According to MS Code of Rules 30-1601-4.3: "In a single agency, a broker is required to disclose, in writing, to the party for whom the broker is an agent in a real estate transaction that the broker is the agent of the party." The written disclosure must use the official MREC Agency Disclosure Form. *^[4]

Types of Commercial Leases

Commercial leases are typically categorized by how operating expenses are allocated between landlord and tenant:

1. Gross Lease (Full Service Lease)

In a gross lease, the tenant pays a fixed monthly rent, and the landlord is responsible for all operating expenses including utilities, property taxes, insurance, and maintenance. This structure provides predictable costs for tenants but typically results in higher base rent. The landlord maintains the exterior structure, major systems (heating, plumbing, electrical), parking areas, and grounds.

2. Triple Net Lease (NNN)

A triple net lease requires the tenant to pay base rent plus all three major expense categories: property taxes, building insurance, and common area maintenance (CAM). This structure results in lower base rent but variable monthly costs. Triple net leases are common for single-tenant retail properties and industrial spaces.

3. Modified Gross Lease

Essential Lease Terms

A comprehensive Mississippi commercial lease agreement should include the following provisions:

Identification of Parties

Full legal names and mailing addresses of both landlord (or property manager) and tenant (business entity or individual). For business entities, include the state of incorporation and registered agent information.

Description of Premises

A detailed description of the leased space including: street address, square footage, type of space (retail, office, industrial, warehouse), suite or unit number if applicable, and any additional areas included (parking spaces, storage, common areas).

Permitted Use

The lease should specify either that the premises may be used for "all purposes legal under law" or limited to specific business activities. Changes to permitted use typically require landlord's written consent. Tenants should verify the property is properly zoned for their intended use before signing.

Lease Term

Commercial leases typically have fixed terms ranging from one to ten years, with commencement and expiration dates clearly stated. Month-to-month arrangements are also possible, requiring written notice (typically 30 days) for termination.

Rent and Payment Terms

The lease should specify the base rent amount, due date, and acceptable payment methods. Commercial rents may be structured as:

Fixed Rent: Same amount throughout the lease term

Graduated Rent: Scheduled increases at specified intervals

Percentage Rent: Base rent plus a percentage of tenant's gross or net sales (common in retail)

Security Deposit

Late Fees and Default

No Statutory Grace Period: Mississippi law does not require landlords to provide a grace period for rent payments. Rent is due on the date specified in the lease, and eviction proceedings can technically begin on the first day of nonpayment. Any grace period must be negotiated and included in the lease.

Late Fee Structures: Common approaches include:

Flat Fee: A fixed dollar amount charged per occurrence or per day until paid

Interest-Based: A percentage of the overdue amount, often calculated daily or monthly

Eviction Procedures for Commercial Properties

Mississippi Code Section 89-7-27 provides three grounds for removing commercial tenants: ^[2]

1. Holdover: When a tenant remains in possession after the lease term expires without landlord's permission.

2. Nonpayment of Rent: After 3 days' written notice demanding payment or possession. Notice may be delivered via email or text message if the tenant agreed in writing to electronic notification.

3. Lease Violation: Any event specified in the written lease agreement as grounds for eviction.

Eviction cases are heard in justice court, county court, or circuit court where the premises is located.

Assignment and Subletting

Mississippi has no specific statutes governing commercial subleases or assignments. All terms must be specified in the lease agreement.

Assignment: The transfer of all remaining interests in the lease to a third party. The original tenant typically remains liable unless expressly released by the landlord.

Sublease: The transfer of less than all rights to a subtenant while the original tenant retains some interest. The original tenant (master tenant) remains responsible for rent and lease compliance.

Best Practice: Require landlord's written consent for any assignment or sublease, with consent not to be unreasonably withheld. The covenant of good faith limits landlord's ability to unreasonably refuse qualified subtenants.

Insurance Requirements

Mississippi does not mandate commercial landlord or tenant insurance by statute. However, most commercial leases include detailed insurance requirements:

Landlord's Typical Coverage:

Fire, flood, and casualty insurance on the building structure

Extended coverage for vandalism and malicious mischief

Full replacement value coverage

Tenant's Typical Coverage:

General liability insurance (commonly $1,000,000 per occurrence)

Property insurance for tenant's fixtures, equipment, and inventory

Business interruption insurance (recommended)

Naming landlord as "additional insured" on liability policies

Ada Compliance

Commercial properties open to the public must comply with the Americans with Disabilities Act (ADA). Mississippi follows the 2010 ADA Standards for Accessible Design and the 2021 International Building Code (effective 2024). ^[5]

Key Requirements:

Accessible parking spaces (number based on total parking capacity)

Accessible primary entrances (ramps, automatic doors, levered handles)

Wide aisles (minimum 36 inches) and accessible pathways

Accessible restrooms in public-facing businesses

Elevators or lifts for multi-story buildings

Penalties: Civil penalties for ADA violations can reach $75,000 for first violations and $150,000 for subsequent violations.

Lease Allocation: The lease should specify whether landlord or tenant is responsible for ADA compliance costs, particularly for tenant improvements.

Additional Common Provisions

Maintenance and Repairs: Clearly allocate responsibility for interior vs. exterior maintenance, HVAC systems, plumbing, electrical, roof, and structural repairs. Tenant is typically responsible for interior repairs from normal wear.

Tenant Improvements (Build-Out): Address who pays for initial improvements, approval requirements, and whether improvements become landlord's property at lease end.

Trade Fixtures: Tenant's personal property, equipment, and trade fixtures typically remain tenant's property and may be removed at lease end, with any resulting damage repaired.

Renewal Options: Specify whether tenant has options to renew, the notice period required, and how renewal rent will be calculated.

Signage: Requirements for tenant signage including size, location, and landlord approval. Tenant must comply with local sign ordinances.

Default and Remedies: Define events of default, cure periods, and landlord's remedies including eviction, acceleration of rent, and recovery of damages.

Landlord's Lien: Mississippi law allows landlords to place a lien on tenant's personal property for unpaid rent. This powerful collection remedy should be addressed in the lease.