The usual forms of leases are the following:

• Ground leases

One form of leasing arrangement is a long-term ground lease, in which the tenant leases vacant land and develops it. Once development is completed, the ground tenant will sublet space to retail, office or industrial tenants, depending on the type of development or may occupy the space itself. Ground leasehold interests may be bought and sold in a manner similar to fee simple property interests. Such use of ground leases for development projects has become increasingly popular over the past 30 years.

• Commercial leases

Most commercial office and retail space, and much of the standard industrial space in the US, is available only through a commercial lease. Most commercial lease transactions commence with an offer to lease (sometimes called letter of intent), which contains the business terms agreed upon by the parties, including the space, term, rent and any tenant inducements. Commercial leases are typically on a net rental basis, which requires a tenant to pay basic rent plus additional rent comprising a proportionate share of real estate taxes, insurance, utility, and common area maintenance charges, or on a gross net basis, which requires a tenant to pay a fixed rent inclusive of all additional costs and expenses. In a retail lease (particularly shopping centers), a tenant may also be required to pay rent based on a percentage of its annual sales.

• Residential leases

Residential leases are often regulated by state or local city legislation; in some cases, the applicable legislation will override the terms of the lease contract, regardless of the intention of the parties. In some cities (New York and San Francisco being prime examples), the ability of the landlord to increase residential rent is limited by regulation. Some cities establish certain rights and obligations of residential property owners and operators above a certain size and commercial landlords and tenants. These rules override the terms of lease agreements, which are otherwise freely negotiated.

Leases are freely negotiable, subject to state laws. In smaller transactions, standard forms that favor the landlord are often used.

The term of a lease is subject to negotiation as are extension rights.

Leases for residential property are usually for one year. Options are possible. For all other asset classes, terms are more long-term, usually set at five, 10 or 15 years with additional options of the tenant extending the term. The market conditions at the time of the lease usually influence the outcome of negotiations. Both parties always want a lease long enough to achieve a return on any investment made to or for the property.

There is no maximum limit on the term set by legislation, but certain entities may lack legal authority to enter into a lease beyond a certain number of years.

Where a tenant plans to make substantial improvements to the premises, it has greater leverage to request extension rights but, like other terms, this is negotiable.

A landlord can generally terminate the lease when the tenant breaches the terms of the lease (with the timely payment of rent and upkeep of the property being the most important terms), which usually includes insolvency (subject to statutory restrictions) and assigning or subletting the property without the consent of the landlord. Negotiated termination rights following a full or partial condemnation or casualty of the property are common as well.

The parties are free to set the rent in other currencies. But arrangements for payment of rent in foreign currency are not at all typical.

This will depend on the agreement of the parties. Rent is usually paid monthly, at the beginning of the month. If there is a lender, they will typically prohibit the borrower/landlord from accepting rent more than one month in advance.

Rent is usually fixed for the initial term. Rent upon renewal or extension may also be fixed or may be adjusted to reflect the fair market value at the time of renewal or extension. The parties may also agree to periodic adjustments when there is a longer-term lease.

In some cities (New York and San Francisco being prime examples), the ability of the landlord to increase residential rent is limited by regulation.

The following is usually required of landlords:

• Repair and maintain the structure of the property, except when the tenant leases all of the property and makes improvements to it
• Insure the property
• Provide tenants with a valid notice of termination (in writing) if terminating the tenancy
• Provide a non-defaulting tenant with quiet enjoyment of the property

The following is usually required of tenants:

• Pay rent on time, including taxes and a share of the operating expenses for certain asset classes
• Keep the property in good order
• Inform the landlord if repairs are needed that are the landlord’s obligation and give the landlord access to the property to carry out repairs
• Give the landlord access (often by appointment) for inspections and the landlord’s work
• Seek the landlord’s prior consent before making alterations to the property

Tenants are generally allowed to assign the lease or sublet the premises if they obtain the consent of the landlord. The landlord is usually required to be commercially reasonable when considering the tenant’s request. Tenant subletting rights are often regulated by state and local laws for residential leases. In some cities (Chicago, for example), the laws are more renter-friendly and provide renters the explicit right to sublet notwithstanding the landlord’s refusal.

If the premises are substantially damaged or destroyed by an act of God, the lease is often terminated. Rent generally abates according to the extent of the damage or destruction. Where there is partial damage, the lease is usually not terminated, and the landlord is obligated to restore the premises. Under state laws, a party involved is generally excused from the performance of its obligations when such circumstances arise beyond the party’s control.

If the premises are damaged or destroyed due to causes attributed to the tenant, then the tenant may be liable for repairs or replacement.

To the extent a lease is silent on this issue, local laws may apply.

The landlord is usually responsible for insuring the leased premises with respect to property insurance and recovers the cost from the tenant in a net lease. Tenants are typically responsible for their own general liability insurance.

Lease agreements typically survive and are binding upon the new owner.

In the absence of a non-disturbance agreement, if a foreclosure is the result of a prior mortgage over the property, the lease will not survive at the option of the lender. Therefore, it is typical for a lender to request that the tenant sign a subordination and non-disturbance agreement so that the lender can keep a lease in place at its option.