South Carolina Commercial Lease Agreement

Introduction

A South Carolina commercial lease agreement is a legally binding contract between a landlord (lessor) and a tenant (lessee) for the rental of commercial real estate. This agreement governs the terms and conditions under which a business may occupy and use commercial property such as office space, retail storefronts, warehouses, or industrial facilities.

Unlike residential leases, which are heavily regulated by the South Carolina Residential Landlord and Tenant Act (SC Code Title 27, Chapter 40), commercial leases in South Carolina operate with significantly more flexibility. ^[1] The parties are presumed to be sophisticated business entities capable of negotiating their own terms, and courts generally enforce the agreement as written.

Legal Framework

South Carolina commercial leases are primarily governed by:

1. SC Code Title 27, Chapter 35 - Creation, Construction, and Termination of Leasehold Estates ^[2]

2. SC Code Title 27, Chapter 37 - Ejectment of Tenants ^[3]

3. SC Code Title 36, Chapter 2A - Uniform Commercial Code: Leases (for personal property) ^[4]

4. Common Law Principles - Established through South Carolina case law

Written Agreement Requirements

South Carolina law has specific requirements regarding the formality of lease agreements:

Oral Agreements (One Year or Less): Under SC Code Section 27-35-10, a tenancy for one year or less may be created by oral agreement. ^[2]

Written Agreements (More Than One Year): SC Code Section 27-35-20 mandates that any agreement for the use or occupation of real estate for more than one year "shall be void unless in writing." This requirement stems from the Statute of Frauds. ^[2]

Notarization: South Carolina does not require commercial leases to be notarized for validity. However, notarization may be advisable for recording purposes or to enhance enforceability.

Recording: While not required for validity between the parties, recording a lease (or a memorandum of lease) with the county Register of Deeds provides constructive notice to third parties and protects the tenant's interest against subsequent purchasers.

Essential Elements of a Commercial Lease

The South Carolina Supreme Court has affirmed that an express or implied contract must exist to create a landlord-tenant relationship. The essential elements include:

1. Identification of Parties: Full legal names and addresses of the landlord and tenant. For business entities, include the entity type (LLC, Corporation, etc.) and state of formation.

2. Property Description: A detailed description of the leased premises, including the street address, suite or unit number, and square footage. For multi-tenant buildings, attach a floor plan if necessary.

3. Lease Term: The commencement date, expiration date, and total duration of the lease. Include any renewal or extension options.

4. Rent Amount and Payment Terms: The base rent, payment due dates, acceptable payment methods, and where payments should be sent. Under SC Code Section 27-35-90, unless otherwise agreed, rent is payable monthly at the end of each calendar month. ^[2]

5. Permitted Use: A clear description of the permitted use of the premises (e.g., retail sales, office space, manufacturing).

Types of Commercial Lease Structures

Commercial leases in South Carolina typically follow one of three expense allocation structures:

Triple Net Lease (NNN)

In a triple net lease, the tenant pays the base rent plus all three major operating expenses:

• Property Taxes
• Property Insurance
• Common Area Maintenance (CAM)

Triple net leases typically result in lower base rent but shift operating cost risk to the tenant. This structure is common for standalone retail buildings and long-term industrial leases.

Gross Lease (Full Service)

In a gross lease, the tenant pays a single, all-inclusive rent amount, and the landlord is responsible for all operating expenses including taxes, insurance, and maintenance. This structure provides cost certainty for tenants but may result in higher base rent. Gross leases are common in multi-tenant office buildings.

Modified Gross Lease

A modified gross lease is a hybrid where the landlord and tenant share responsibility for operating expenses. The specific allocation is negotiated and should be clearly documented in the lease. Common variations include:

• Landlord pays base year expenses; tenant pays increases
• Tenant pays utilities only
• Expenses split by percentage

Common Area Maintenance (Cam) Charges

CAM charges cover the cost of maintaining shared spaces and building systems. Typical CAM expenses include:

• Parking lot maintenance and striping
• Landscaping and grounds maintenance
• Common area utilities and lighting
• HVAC maintenance and repair
• Security and fire safety systems
• Property management fees
• Snow and trash removal

CAM Caps: Tenants should negotiate a CAM cap to limit annual increases. Without a cap, CAM charges can increase significantly year over year.

Tenant Obligations Under South Carolina Law

SC Code Section 27-35-75 establishes specific obligations for commercial tenants: ^[2]

1. Code Compliance: Comply with all applicable building and housing code provisions that materially affect health and safety.

2. Property Care: Not deliberately or negligently destroy, deface, damage, impair, abuse, or remove any part of the premises.

3. Conduct: Conduct business in a manner that will not disturb other lessees' peaceful enjoyment of their premises.

4. Lease Compliance: Comply with all terms of the commercial lease agreement.

Landlord Rights: Inspection and Access

Under SC Code Section 27-35-75, landlords have the right to inspect commercial premises, subject to the following requirements: ^[2]

Notice Requirement: Except in emergencies, the landlord must give the tenant at least 24 hours' written notice of intent to enter and inspect.

Reasonable Time: Entry must be scheduled at a reasonable time.

No Harassment: The landlord must not abuse the right of access or use it to harass the tenant.

Tenant Cooperation: If a tenant unreasonably withholds consent, the landlord may seek injunctive relief in magistrate or circuit court without posting bond. The prevailing party may recover actual damages and reasonable attorney's fees.

Sublease and Assignment

SC Code Section 27-35-60 contains an important rule regarding subleases: ^[2]

Rent Held in Trust: Any rent collected by a tenant from an unauthorized subtenant is deemed to be held in trust for the landlord until the landlord's rent claim is satisfied.

Best Practice: Commercial leases typically include provisions requiring landlord consent for any sublease or assignment. Such consent is often "not to be unreasonably withheld."

Termination of the Lease

South Carolina law provides various mechanisms for lease termination:

Fixed Term Expiration: Under SC Code Section 27-35-110, a tenancy for a specified term ends automatically on the last day of the agreed term without notice. ^[2]

Month-to-Month Termination: Under SC Code Section 27-35-120, either party may terminate a month-to-month tenancy with 30 days' written notice. ^[2]

Nonpayment of Rent: Under SC Code Section 27-35-140, failure to pay rent when due terminates all tenancies, and the tenant "shall forthwith vacate the premises without notice." ^[2]

Abandonment: Under SC Code Section 27-35-150, absence from the property for 15 days after default in rent payment constitutes abandonment. The landlord may then enter and take possession. ^[2]

Holdover Tenants

South Carolina law imposes significant penalties on tenants who hold over after their lease expires:

Double Rent Penalty: Under SC Code Section 27-35-170, a tenant who holds over after written demand for possession for a period of three months must forfeit double the value of the use of the premises. ^[2]

Broken Promise Penalty: Under SC Code Section 27-35-180, if a tenant gives written notice of intent to vacate but fails to do so, the tenant must pay double rent. ^[2]

Ejectment (Eviction) Process

Commercial evictions in South Carolina are governed by SC Code Chapter 37: ^[3]

Grounds for Ejectment (Section 27-37-10):

1. Failure or refusal to pay rent when due or demanded
2. Expiration of the lease term
3. Violation of lease terms or conditions

Procedure:

Step 1: Landlord files an application for ejectment in magistrate court.

Step 2: Magistrate issues a written rule requiring tenant to vacate or show cause within 10 days.

Step 3: If tenant fails to appear and show cause, magistrate issues warrant of ejectment.

Step 4: If tenant contests, a hearing is held. Either party may demand a jury trial.

Step 5: Constable or sheriff gives 24 hours' notice before physical ejectment.

Commercial Lease Special Provision (Section 27-37-155): In commercial lease ejectment cases, the tenant is required to pay all rent that becomes due during the proceedings. Failure to do so results in immediate warrant of ejectment. ^[3]

Sale of Property During Lease Term

Under SC Code Section 27-35-50, when real estate is sold while under lease, the purchaser automatically becomes the landlord "as if the purchaser had been the landlord in the first instance." The new owner is entitled to all benefits and rights under the lease from the date of purchase. ^[2]

Ada Compliance Considerations

Commercial properties open to the public must comply with the Americans with Disabilities Act (ADA). ^[5]

Existing Buildings: Title III requires "readily achievable" barrier removal for existing structures. What is "readily achievable" depends on the business's resources.

New Construction: All newly constructed places of public accommodation (post-January 26, 1993) must fully comply with ADA Accessibility Guidelines (ADAAG).

Landlord and Tenant Liability: Under Title III, both landlord and tenant can be held liable for ADA violations. The lease should clearly allocate responsibility for ADA compliance, including who bears the cost of modifications.

Penalties: The Department of Justice can impose fines up to $75,000 for a first violation and $150,000 for subsequent violations.

Real Estate Broker Disclosure

SC Code Section 40-57-370 governs disclosure of real estate brokerage relationships. ^[6]

Important Exception for Leases: Under Section 40-57-370(G), the brokerage relationship disclosure requirements do not apply to transactions regarding the rental or lease of property. This exemption was confirmed in the 2024 amendment (Act No. 204, effective May 21, 2024).

Best Practice: Although not legally required for lease transactions, it is still advisable for real estate brokers to provide the Disclosure of Real Estate Brokerage Relationships form to promote transparency. ^[7]

Security Deposits

Key Point: South Carolina has no statutory requirements for commercial lease security deposits. The Residential Landlord and Tenant Act (SC Code Title 27, Chapter 40) does not apply to commercial tenancies.

This means:

• No maximum deposit amount
• No requirement to hold deposits in escrow or separate account
• No mandatory interest payments on deposits
• No statutory return deadline (negotiate in lease)

Recommendation: Parties should negotiate and clearly document all security deposit terms including amount, holding requirements, permitted deductions, and return timeline.

Default Tenancy Rules

If no tenancy term is specified in the agreement, SC Code Section 27-35-30 provides that all tenancies of non-agricultural real estate are deemed month-to-month unless there is an agreement otherwise. ^[2]