Wisconsin Commercial Lease Agreement

1. Introduction

A Wisconsin commercial lease agreement is a legally binding contract between a landlord (lessor) of commercial real property and a business tenant (lessee). This document establishes the terms and conditions under which the tenant may occupy and use the premises for business purposes. Unlike residential leases, commercial leases in Wisconsin are primarily governed by contract law principles, with fewer statutory protections for tenants. ^[1]The agreement defines essential elements including rent, lease term, permitted uses, expense allocations, and the respective rights and obligations of both parties. Commercial properties may include retail spaces, office buildings, warehouses, industrial facilities, and mixed-use developments.

Legal Framework in Wisconsin

Governing Law

Commercial leases in Wisconsin are governed primarily by:**Wisconsin Statutes Chapter 704 **(Landlord and Tenant) - Contains general provisions applicable to all tenancies, including definitions, notice requirements, and default remedies. ^[1]Wisconsin Statutes Chapter 706 **(Conveyances of Real Property) - Governs recording requirements and formal requirements for real property transactions. ^[3]Common Law Principles **- Courts apply contract law, property law, and equitable principles to interpret and enforce commercial lease terms.

Writing Requirements (statute of Frauds)

Wisconsin law requires that any lease for more than one year must be in writing and signed by both parties. ^[3] The written lease must include: - Amount of rent or other consideration - Time of commencement and expiration of the lease - A reasonably definite description of the premisesLeases for one year or less may be oral, though written documentation is strongly recommended for clarity and enforceability. If a tenant enters into possession under an unenforceable oral lease for more than one year, they become a periodic tenant.

Broker Disclosure Requirements

When a real estate broker or agent is involved in a commercial lease transaction, Wisconsin law requires specific disclosures. Under Wis. Stat. Section 452.135, a real estate firm must provide a written disclosure statement to clients before entering into an agency agreement. ^[4]This disclosure details the duties owed by the broker to the client, including duties of fairness, honesty, skill, care, accurate information, confidentiality protection, and safeguarding of trust funds.

Types of Commercial Lease Structures

Commercial leases in Wisconsin typically follow one of three expense structure models, determining how operating costs are allocated between landlord and tenant:

Triple Net Lease (Nnn)

In a triple net lease, the tenant pays the base rent plus all three major operating expense categories: - Property taxes - Property insurance - Common area maintenance (CAM)This structure is common for single-tenant commercial properties and provides the landlord with predictable net income while shifting operating cost variability to the tenant.

Gross Lease (full-Service Lease)

In a gross lease, the landlord pays all operating expenses, and the tenant pays a single, all-inclusive rent amount. This structure is common for multi-tenant office buildings where shared costs are difficult to allocate precisely. The rent is typically higher to account for the landlord's expense obligations.

Modified Gross Lease

A modified gross lease represents a middle ground where landlord and tenant share operating expenses according to negotiated terms. Common arrangements include: - Tenant pays utilities; landlord pays taxes and insurance - Tenant pays a base year expense amount; landlord pays excess - Split responsibility for CAM costsOperating expenses typically include: property taxes, insurance, common area maintenance, landscape maintenance, HVAC maintenance, janitorial services, security, and management fees.

Essential Lease Terms

Identification of Parties

The lease must clearly identify: - Landlord: Full legal name, address, and contact information - Tenant: Business entity name, type (LLC, corporation, etc.), state of formation - Guarantors (if applicable): Personal guarantors for tenant obligations

Premises Description

Wisconsin law requires a "reasonably definite description of the premises." ^[3] The description should include: - Street address and legal description - Square footage (rentable vs. usable) - Suite or unit number - Floor plan or exhibit - Common areas and parking allocation

Lease Term

The lease must specify the commencement date and expiration date. Key considerations include: - Fixed term vs. periodic tenancy - Rent commencement date (may differ from possession date) - Free rent or build-out periods - Renewal options and terms - Early termination rights

Rent and Payment Terms

The lease must clearly state the amount of rent. ^[3] Rent provisions typically include: - Base rent amount (monthly/annual) - Rent escalation clauses (fixed increases or CPI adjustments) - Additional rent (CAM, taxes, insurance pass-throughs) - Percentage rent (for retail - based on sales volume) - Payment due date and method - Late fees and grace periods

Security Deposit

Unlike residential leases, commercial security deposits in Wisconsin are largely governed by contract terms rather than statute. ^[6] The detailed requirements of ATCP 134 (21-day return, itemized statements, interest in some municipalities) apply primarily to residential tenancies. ^[6]Commercial lease security deposit provisions should address: - Amount required (typically 1-3 months rent) - Permitted deductions - Interest obligations (if any) - Return timeline after lease termination - Letter of credit alternatives

Permitted Use

The lease should clearly define permitted uses for the premises. Considerations include: - Specific business operations permitted - Exclusive use rights (preventing landlord from leasing to competitors) - Prohibited uses - Compliance with zoning and building codes - Operating hours and days

Landlord Rights and Obligations

Delivery of Possession

The landlord must deliver possession of the premises to the tenant on the commencement date. The lease should specify: - Condition of premises at delivery - Landlord's work or build-out obligations - Remedies if delivery is delayed

Repairs and Maintenance

Unlike residential leases, commercial lease repair obligations are determined primarily by contract. Typical allocations include: - Landlord: Structural components, roof, exterior walls, common areas - Tenant: Interior finishes, HVAC maintenance, fixtures, signage

Quiet Enjoyment

The landlord impliedly covenants that the tenant will have quiet enjoyment of the premises without interference. This includes protection from: - Landlord interference with business operations - Third-party claims to the property - Unreasonable construction or maintenance disruptions

Right of Entry

The lease should specify landlord's right to enter the premises for: - Inspections - Repairs and maintenance - Showing to prospective tenants or buyers - Emergency situationsReasonable notice requirements should be established (typically 24-48 hours for non-emergencies).

Tenant Rights and Obligations

Rent Payment

The tenant's primary obligation is timely payment of rent. The lease specifies the rent amount, payment date, and acceptable payment methods. ^[1]

Compliance With Laws

Tenants must comply with all applicable laws, regulations, and codes, including: - Zoning and land use regulations - Building codes and fire safety requirements - Health and sanitation regulations - ADA accessibility requirements ^[7] - Environmental regulations ^[8]

Insurance Requirements

Commercial leases typically require tenants to maintain: - General liability insurance (minimum coverage specified) - Property insurance for tenant improvements and personal property - Workers' compensation insurance - Business interruption insurance - Landlord named as additional insured

Alterations and Improvements

The lease should address tenant improvements: - Landlord approval requirements - Who owns improvements at lease end - Tenant improvement allowances (TI) - Restoration requirements at lease termination - Mechanic's lien protections

Assignment and Subletting

Under Wisconsin Statute Section 704.09, a tenant may assign or sublet the leased premises unless the lease specifically prohibits it. ^[9]Most commercial leases restrict assignment and subletting, requiring landlord consent. Key provisions include:

Assignment Vs. Sublease

Assignment: Transfer of the tenant's entire remaining interest in the lease.Sublease: Transfer of less than the entire remaining interest; original tenant retains some rights.

Common Provisions

• Landlord consent requirements (and reasonableness standards) - Recapture rights (landlord may terminate and relet) - Profit sharing (landlord shares in sublease premium) - Original tenant remains liable unless expressly released - Assignee/subtenant qualification standards

Default and Remedies

Events of Default

Common tenant defaults include: - Failure to pay rent when due - Breach of lease covenants - Unpermitted assignment or subletting - Bankruptcy or insolvency - Abandonment of premises - Material misrepresentation

Landlord Remedies

Wisconsin commercial landlords have several remedies upon tenant default:

• Eviction: Court proceedings under Wis. Stat. Sections 799.40-799.45. ^[10]
• Self-Help (Potentially): Unlike residential leases, commercial landlords may be able to use self-help eviction if permitted by the lease terms. Legal counsel should review before attempting.
• Rent Acceleration: Commercial leases may include acceleration clauses allowing landlord to collect remaining lease payments upon default.
• Damages: Recovery of unpaid rent, late fees, interest, attorneys' fees, and other lease-specified damages.

Eviction Process

If court eviction is pursued, the typical process includes: 1. Notice of default per lease terms 2. Cure period (if provided in lease) 3. Filing eviction summons and complaint 4. Service on tenant 5. Court hearing (bifurcated: eviction, then money judgment) 6. Writ of restitution if landlord prevails 7. Sheriff-assisted removal if necessary

Tenant Remedies

If landlord defaults, tenant remedies may include: - Self-help repair with rent offset (if permitted) - Lease termination for material breach - Damages for breach of quiet enjoyment - Specific performance

Special Provisions and Considerations

Automatic Renewal Clauses

Wisconsin Statute Section 704.15 requires landlords to notify tenants of automatic renewal clauses. The landlord must give notice between 15-30 days before the deadline to prevent renewal, reminding the tenant of the renewal clause and deadline. ^[11]

Holdover Tenancy

Under Wisconsin Statute Section 704.25, if a tenant remains in possession after lease expiration, the landlord may: (1) treat the tenant as a periodic tenant, (2) treat as a trespasser and seek removal, or (3) accept rent and create a new tenancy. ^[12]Section 704.27 allows landlords to recover damages, including potentially double rent if the lease so provides.

Recording the Lease

While not required, recording a commercial lease with the Register of Deeds is recommended for leases exceeding one year to protect the tenant's interest and provide constructive notice to third parties. ^[3]Recording requirements include: - 3" x 3" blank space in upper right corner - Minimum margins (1/2" top, 1/4" sides/bottom) - Full legal description of property - Original signatures or notary acknowledgment - Recording fee: approximately $30

Ada Accessibility Compliance

Commercial properties in Wisconsin must comply with the Americans with Disabilities Act (ADA). Wisconsin adopted the 2010 ADA Standards for Accessible Design in 2018. [cite id="7"]^[14]Key requirements include: - At least one accessible route from parking to entrance - Door widths: minimum 32" clear opening - Accessible restroom facilities - Barrier removal when "readily achievable"Leases should specify responsibility for ADA compliance and any required modifications.

Environmental Compliance

Commercial tenants must comply with Wisconsin DNR environmental regulations. ^[8]Key considerations: - Hazardous waste generation and disposal requirements - Spill reporting (24-hour hotline: 1-800-943-0003) - Underground storage tank regulations - Environmental due diligence before signingLessees may not be liable for pre-existing contamination if they did not cause or exacerbate it. Liability clarification letters are available from the DNR.

Lease Termination

Expiration

A fixed-term lease terminates automatically on the expiration date unless renewed. Tenant obligations at expiration typically include: - Surrender of premises in required condition - Removal of tenant's personal property - Restoration of alterations (if required) - Return of keys and access devices

Early Termination

Leases may include early termination provisions: - Tenant termination rights with notice and payment - Kick-out clauses (for retail based on sales) - Casualty or condemnation termination rights - Co-tenancy clauses (for retail in shopping centers)

Abandoned Property

Wisconsin Statute Section 704.05(5) addresses personal property left by tenants. After lease termination, the landlord must give the tenant reasonable opportunity to remove property. If the tenant fails to remove within a reasonable time, the landlord may dispose of or sell the property and apply proceeds to amounts owed.