Oklahoma Commercial Lease Agreement

Oklahoma Commercial Lease Agreement

An Oklahoma commercial lease agreement is a legally binding contract between a landlord and an individual or entity for the rental of commercial property. The document outlines the various provisions of the rental agreement, such as lease duration, rent amount, security deposit, permitted use, exclusivity, and more.

Commercial properties in Oklahoma include retail stores, office spaces, warehouses, manufacturing facilities, restaurants, and other non-residential properties used for business purposes.

Legal Framework in Oklahoma

Commercial Vs. Residential Leases

Oklahoma landlord-tenant law is codified in Title 41 of the Oklahoma Statutes. The first part of Title 41 (Sections 1-61) governs commercial leases, while the Residential Landlord and Tenant Act (Sections 101-201) applies only to residential properties.^[1]

Key Differences From Residential Leases

No statutory security deposit limits (residential limits do not apply)

No implied warranty of habitability

Greater freedom of contract for both parties

Less detailed statutory notice requirements

Fewer consumer protection regulations

Types of Commercial Lease Structures

Commercial leases are typically structured in one of three ways, each with different allocations of operating expenses between landlord and tenant:

Triple Net Lease (Nnn)

In a Triple Net (NNN) lease, the tenant pays the base rent plus all operating expenses. Each "N" or "Net" stands for Property Taxes, Insurance, and Operating Expenses. The tenant is responsible for:

Property taxes

Property insurance

Common area maintenance (CAM)

HVAC maintenance

Landscape maintenance

Repairs and maintenance

Triple Net leases are common for single-tenant properties and provide landlords with predictable income while shifting operating cost risk to tenants. Tenants often negotiate expense caps to limit annual increases.

Gross Lease (full Service)

In a Gross Lease, the tenant pays a fixed monthly rent amount, and the landlord is responsible for all operating expenses. This structure provides tenants with predictable costs and simplified budgeting, though the base rent is typically higher to compensate the landlord for expense risk.

Modified Gross Lease

A Modified Gross Lease is a hybrid approach where the landlord and tenant share responsibility for operating expenses. The specific allocation of expenses is negotiated and should be clearly specified in the lease agreement.

Required Disclosures

Disclosure of Brokerage Duties and Responsibilities

When a real estate broker is involved in a commercial lease transaction in Oklahoma, specific disclosure requirements apply under The Oklahoma Real Estate License Code.

Under 59 OK Stat Section 858-355.1(C), a broker who is providing brokerage services to one or both parties must describe and disclose in writing the broker's duties and responsibilities set forth in Section 858-353 prior to the party or parties signing a contract to sell, purchase, lease, option, or exchange real estate.^[2]

Additionally, Section 858-355.1(D) requires that a firm providing brokerage services to both parties in a transaction shall provide written notice to both parties that the firm is providing brokerage services to both parties prior to the parties signing a contract.

The broker disclosure must include information about:

The broker's duties and responsibilities under Oklahoma law

Whether the broker represents the landlord, tenant, or both parties

Compensation and fees to be assessed

Any services the broker will not provide

Essential Lease Provisions

Premises Description

The lease should include a precise description of the leased premises, including the physical address, square footage, and any common areas the tenant may access. Many leases include a floor plan or site map as an exhibit.

Lease Term

Commercial leases typically range from 3 to 10 years, with options to renew. The lease should specify the commencement date, expiration date, and any renewal options, including notice requirements for exercising renewal rights.

Rent and Payment Terms

The lease should clearly state the base rent amount, payment due dates, acceptable payment methods, and any late payment penalties. Many commercial leases include annual rent escalations based on a fixed percentage or the Consumer Price Index (CPI).

Security Deposit

Oklahoma does not have statutory limits on security deposits for commercial leases. Unlike residential leases (governed by Title 41, Section 115), commercial security deposit amounts are fully negotiable and typically range from one to three months' rent.^[3]

Permitted Use

The lease should clearly define the permitted use of the premises. Tenants should ensure the permitted use clause is broad enough to accommodate their business needs, while landlords may want to restrict uses that could compete with other tenants or create liability.

Notice Requirements and Termination

Non-Payment of Rent

Oklahoma law provides specific notice requirements for commercial tenants who fail to pay rent:

If rent is past due for less than 3 months: Landlord may serve a 5-day written notice to quit

If rent is past due for 3 months or more: Landlord may serve a 10-day written notice to quit

These notice periods are established under Title 41, Sections 6-7 of the Oklahoma Statutes.^[4]

Month-To-Month Tenancy

For commercial leases without a fixed term (at-will tenancy), either party may terminate by providing 30 days written notice. This is the same notice requirement that applies to residential month-to-month tenancies.

Lease Expiration

Under Title 41, Section 8, if the commercial lease has a specific expiration date, the tenancy terminates on that day and no further notice is required. However, if the landlord accepts rent after the lease expires, a new tenancy may be created.^[5]

For leases of less than one year where rent is accepted after expiration, the lease renews for another term of the same length.

Eviction Process (forcible Entry and Detainer)

Commercial evictions in Oklahoma proceed through the district courts as Forcible Entry and Detainer actions under Title 12, Section 1148 of the Oklahoma Statutes.^[6]

Eviction Procedure

Step 1: Provide proper written notice to tenant (5 or 10 days for non-payment)

Step 2: File Petition for Forcible Entry and Detainer in district court (filing fee: approximately $85)

Step 3: Court issues summons to be served on tenant

Step 4: Court hearing (scheduled 5-10 days after summons issued)

Step 5: If judgment for landlord, court issues Writ of Execution

Step 6: Tenant has 48 hours to vacate after Writ is delivered

Maintenance and Repair Obligations

The allocation of maintenance and repair responsibilities in commercial leases depends on the lease structure:

Regardless of lease type, structural repairs (roof, foundation, exterior walls) are typically the landlord's responsibility unless expressly stated otherwise in the lease.

Insurance Requirements

While Oklahoma law does not mandate commercial liability insurance, most commercial leases require tenants to maintain coverage:

General Liability Insurance: Typically $1 million per occurrence / $2 million aggregate

Commercial Property Insurance: Covers tenant's business property, inventory, equipment

Business Interruption Insurance: Often required by lenders or landlords

Workers' Compensation: Required by Oklahoma law for employers with one or more employees

Landlords frequently require being named as an "additional insured" on the tenant's liability policy. The lease should specify exact coverage requirements, policy limits, and certificate of insurance delivery requirements.^[7]

Ada Compliance

The Americans with Disabilities Act (ADA) places legal responsibility for accessibility compliance on both landlords and tenants. While the lease may allocate responsibility between parties, both remain legally liable to third parties.^[8]

Key ADA considerations:

Landlords typically responsible for common areas (parking, entrances, restrooms)

Tenants typically responsible for interior of leased space

Penalties up to $75,000 for first offense, $150,000 for subsequent violations

Both parties can be named in ADA lawsuits regardless of lease terms

Assignment and Subletting

Commercial lease assignment and subletting are governed by the lease terms:

Assignment: Transfers the tenant's entire interest to a new tenant

Sublease: Creates a new landlord-tenant relationship, with original tenant as sublandlord

Most leases require landlord's written consent for either

Original tenant often remains liable unless expressly released

Tenants should carefully review assignment and subletting provisions before signing, especially if business expansion, contraction, or sale may occur during the lease term.

Holdover Tenancy and Renewal

If a tenant remains after lease expiration:

Landlord may accept continued rent (creates new tenancy, often month-to-month)

Landlord may pursue eviction

Many leases impose holdover rent penalties (often 150-200% of base rent)

Renewal options should specify notice requirements, rent for renewal term, and conditions for exercise.

Environmental Considerations

Environmental issues can create significant liability for both landlords and tenants:

Phase I Environmental Site Assessment may be advisable before signing

Tenant may be liable for contamination occurring during tenancy

CERCLA (federal Superfund law) liability can affect both parties

Hazardous materials disclosure should be included in lease

Tenants should conduct due diligence on property environmental history before signing a commercial lease.^[9]