A commercial lease agreement is not a longer version of a residential lease. It is a business document, and in the 2026 market, where tenants demand flexibility and owners demand certainty, every clause has a financial impact.
Permitted Use and Permits
Define precisely what the tenant may do in the property, and state who is responsible for obtaining a business license and ensuring that the use complies with the building permit. Unauthorized use is the greatest risk in commercial real estate and can shut down an entire property.
Term, Options and Early Termination
Set a base lease term, renewal options, and the advance notice required to exercise them. If there is an early termination right, it should be balanced and include compensation and a meaningful notice period. A unilateral option benefiting only the tenant reduces the property's value.
Rent, VAT and Indexation
Commercial leases are subject to VAT, so expressly state that the rent is before VAT. Define the index to which the rent is linked and the adjustment dates, and set step-up increases for long-term agreements.
Additional Payments
Municipal property tax (arnona), electricity, water, building committee fees or management fees in a commercial center, insurance, and the allocation of costs for common areas. For each item, specify who pays and what happens during vacancy periods.
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Security
Common forms of security in commercial real estate include an autonomous bank guarantee, a promissory note with guarantors, and security checks. The amount of security should be based on the tenant's risk profile and the cost of fit-out works, not on a fixed formula.
Maintenance and Repairs
Distinguish between the building envelope and systems, which are the owner's responsibility, and routine internal maintenance, which is the tenant's responsibility. Define response times for faults that prevent operations.
Return of the Property
Specify the required condition of the property at the end of the lease: restoration to its original condition, leaving fit-out works in place, or removing signage. Omitting this clause leads to a dispute in almost every handover.
The Clause That Delivers the Most Value
Require the tenant to maintain insurance, including third-party liability and contents insurance, with a waiver of subrogation against the owner. No cost to the owner, substantial protection.
The Flamingo team drafts and closes commercial lease agreements as part of property management, including vetting the tenant before signing.
