What is a Master Lease Agreement
A master lease agreement serves as a framework contract between the lessor and the lessee that spells out the general terms of leasing all or part of a property. These agreements are also commonly referred to as head leases or master lease agreements. A master lease functions as a tenancy-at-will until the parties decide to execute a sub-lease.
A typical scenario involves a lessor who wishes to maintain long-term possession of the property but cannot immediately afford to purchase or improve it. By signing a master lease agreement, the parties have made their intentions clear and circumvented the potential delay or harm of an oral agreement. In addition, this type of lease acts as an assurance to the lessor that the lessee will not upset or vacate the property until a sub-lease is executed.
Although the master lease agreement predominately benefits the lessor, it can be advantageous to both parties. The lessor retains the option to make improvements or renovate the property. In addition , by providing the lessee with exclusive possession and use the lessor creates a sense of tenant loyalty and establishes a long-term relationship.
The most evident difference between a standard lease and a master lease is exclusivity. In a master lease, the lessee has exclusive and quiet possession of the property during the life of the tenancy. During this time, the parties can negotiate the placement and terms of the sub-lease. A master lease also typically gives the lessee a stated duration for occupancy and may include renewal options.
As a general rule, the master or head lease in a two-party leasing arrangement supersedes a subsequent lease unless the agreement expressly states otherwise. If the lessee does not include a clause in the sub-lease that the sub-tenant will be bound by the master lease, then the sub-tenant will not be bound by the master lease. However, the sub-tenant will still be liable to fulfill all obligations set forth in the sub-lease because the sub-lease incorporates by reference the material terms of the master lease.
Essential Elements of a Master Lease Agreement Template
A master lease agreement template is a foundational document for landlords and property managers. It outlines the rights and responsibilities of the tenant and the property owner in a rental agreement that concerns a building or group of buildings.
The master lease is a significant contract from both the perspective of the landlord and the tenant. For a commercial tenant, which is often the case, it sets out the basic structure of a whole legal and financial relationship with the landlord. A consumer tenant usually has less complex interests, and the basic master lease agreement is also less complex.
A master lease agreement template helps businesses manage a building as a rented legal entity. The responsibilities of the landlord and the tenant are set out in sections within the text of the document. The first sections of most lease agreements are dedicated to the major details of the building and the rental terms, such as descriptions of the property, parties to the agreement, rent, maintenance or taxes.
The basics clauses of a master lease agreement template, almost always include: Master lease agreements cover the extent of the building and what is rented. A tenant may only have a part of the building through a master lease agreement. The dividing line between the space within the leased area and what belongs to the landlord is usually defined in detail in the master lease agreement.
The terms section of the master lease agreement template includes the schedule of payments for the duration of the agreement. It defines the types of payments a tenant is responsible for, including taxes, services, utilities, insurance and additional rent. The section also identifies who pays property taxes, what happens in the case of default (failure to pay or maintain the property), and liability for damages.
The master lease agreement template must describe the general maintenance responsibilities of the parties. The master lease agreement template must describe which party is responsible for certain type of maintenance issues. It should also include clauses defining exactly how maintenance will be executed.
The sublease provision is common in most master lease agreements. This clause indicates the rights of the tenant to sublet or assign the lease. A provision granting a tenant the right to sublease or assign part of the premises requires the permission of the landlord.
Commercial tenants depend on a master lease agreement template to clarify rights and responsibilities in their space. A master lease agreement will define the basic details of the building and the terms of the lease. Rental terms, maintenance responsibilities and subleasing clauses are the common elements of a master lease agreement template.
Advantages of a Master Lease Agreement Template
For both landlords and tenants, a master lease agreement template can be invaluable as it streamlines the process of leasing multiple units to a single tenant. If you plan to lease several apartments or condos to one individual, a master lease agreement template will save you time by providing a standard document that covers all the units under the agreement. Because these leases are identical in most respects, there is no need to repeat the same terms and conditions over and over again for each individual unit.
A master lease agreement template will also help eliminate confusion for both you and your tenant, especially when it comes to the collecting of rent. You will be able to charge a single monthly rent payment for all of the units covered by the lease, instead of multiple payments for each individual unit. Additionally, having one single master lease agreement saves time when it comes to reviewing your rental documents. It also eliminates problems caused by the differing terms that may be present when many different lease agreements are involved.
Finally, a master lease agreement template will allow you to avoid some of the potential conflicts that might arise in situations where the individual rental terms are greatly different. It ensures that all the tenants will have the same rights and responsibilities, and it helps you avoid difficulties negotiating separate lease agreements for each individual unit. A master lease agreement template simplifies the rental process for both you and your tenants.
Common Pitfalls in Creating Master Lease Agreements
Those creating a master lease agreement should avoid the following pitfalls:
- Failing to include clauses that meet the needs of the tenant. Many landlords will prepare a boilerplate document that is standard in most commercial real estate transactions. These agreements often include outdated or irrelevant clauses that ultimately do not benefit the tenant. A master lease is a substantial investment, and tenants should seek to have a say in what the document contains.
- Failing to consider the demands of residents. This will be a primary concern for a landlord or developer that manages a multi-family complex. The needs of the community it serves will be unique, and a template that does not reflect its concerns will likely not stand up to scrutiny from residents.
- Not adequately responding to tenant concerns. A tenant may have concerns about elements of a master lease that are important to them. Ignoring their feedback may risk an otherwise successful transaction, and could effectively stall business.
- Not consulting with an attorney. Landlords and tenants should not enter into any type of commercial real estate agreement without legal representation. A skilled attorney can easily identify common provisions that may be overlooked by those unfamiliar with real estate law. An experienced attorney will also be able to foresee issues that could arise based on the current draft of a master lease, and offer assistance in crafting provisions that will bring about a successful outcome for all parties involved.
It is imperative that you clearly define all of your legal rights and responsibilities in your master lease agreement, and ensure that there are no loopholes that could potentially harm you down the line. While a master lease agreement may require more thought than a typical commercial real estate lease, it is well worth your time to minimize the risk associated with the transaction.
How to Tailor a Master Lease Agreement Template
The customization of a master lease agreement template is an essential step in ensuring that the agreement meets the specific needs and requirements of both the lessor and lessee. The process begins with a thorough review of the template to identify any clauses or provisions that may not be applicable to the particular lease agreement being entered into. This is where flexibility and attention to detail are crucial; it may be necessary to consider restructuring entire sections or adding supplementary terms to align with the unique aspects of the intended lease.
Once the template is tailored to the desired extent, it is prudent to consult with legal professionals specializing in real estate leasing. These professionals can provide guidance on whether any industry-specific provisions should be included , and help ensure that the agreement complies with any legal requirements set forth by local, state, or federal jurisdictions.
Additionally, it is important to maintain an open line of communication with the lessor and any other parties involved in the lease agreement. This will facilitate a collaborative approach to customizing the master lease agreement template, and can help to address any concerns or specific requests by the parties.
Ultimately, the goal of customizing a master lease agreement template is to create a comprehensive document that addresses all the necessary considerations and accurately reflects the intentions of the parties involved. It is a crucial step in the leasing process that should not be overlooked.
Legal Implications of Master Lease Agreements
When entering into a master lease agreement, it is crucial to understand the legal considerations at hand. Although these types of agreements are generally used for residential, commercial, and industrial properties alike, they do come with their own set of rules and regulations when it comes to the law. The very basic assumption for a master lease is that each agreement will be legally enforceable—therefore, all parties involved in the lease have an obligation to abide by the terms and conditions stated in the contract.
By the same token, the property owner is also bound by any contractual obligations they made to the master tenant. This includes a provision for rent payments to be made in accordance with the agreement’s stipulations.
When drafting master lease agreements, both the lessor (owner) and the lessee (tenant) are responsible for adhering to zoning ordinances. Each state has different regulations that govern how leasing documents are written, so it is up to the lessor to comply with all required legal filings. In most cases, real estate agents and brokers assume the responsibility for filing the required paperwork and making sure everything is signed before the tenants take residence. However, the property owner remains accountable to the real estate professional for any legal problems that may arise.
In the event that there is a dispute between the lessor and lessee, both parties should be aware of the fact that most lease agreements contain dispute resolution clauses. As defined in these clauses, the lessor and lessee have a duty to confer about the issue(s) at hand and attempt to solve the problem through compromise. If no solution can be reached, legal action is the next step.
As you can see, legal considerations for master lease agreements are fairly straightforward. If you are a property owner who is new to the business or in danger of violating other rules and regulations, it is in your best interest to hire a real estate professional to assume the legal responsibilities.
Master Lease Agreement Template Resources
The most reliable sources for a master lease agreement file are online legal services and sites that provide editable real estate documents. These sources include templates for all types of lease agreements, including master leases. Online service providers such as Rocket Lawyer offer downloadable and editable templates for nearly all real estate transactions, including rent agreements with a landlord for a home, apartment or other residential property. They also provide a free consultation with a licensed attorney who can answer any questions about the lease agreement form and offer unique advice for particular situations that may not apply to a generic template. American Apartment Owners Association provides an entire suite of downloadable, editable, and fillable legal documents that include a master lease agreement form . They also offer practical advice and postings on their blog that focus on landlords and renters. LegalZoom is another well-known site that offers free downloadable lease agreements, including master and sublease forms. In addition, they provide attorney consultations for a fee, which are worth the money and can often eliminate having to pay for a contract review or other legal services later. LawDepot and Nolo also have a variety of downloadable and fillable lease forms for a wide range of scenarios. Other great resources include: All the sites listed can also provide information on paying for additional services, including one-on-one consultations with a licensed attorney, professional reviews or re-writes of the master lease agreement, and other legal services.