Michigan Commercial Leases: Key Clauses & NNN Structures
Key considerations for drafting enforceable commercial leases in Michigan, focusing on Triple Net (NNN) expense recovery and Make Good obligations.
Legal Disclaimer
This content is for general informational and educational purposes only. It does not constitute legal advice and should not be relied upon as such. Laws change frequently — always verify current regulations and consult a licensed attorney in your jurisdiction for advice specific to your situation. Landager is a property management platform, not a law firm.Information last verified: May 2026.
Drafting a commercial lease in Michigan involves considerations under the Truth in Renting Act (MCL 554.631). The lease agreement serves as a primary document governing the relationship between the landlord and the business entity.
The Dominance of the Net Lease (NNN)
In the Michigan commercial and industrial real estate landscape, institutional landlords rarely utilize "Gross Leases" (where the tenant pays one flat rental fee, and the landlord covers all property taxes, insurance, and maintenance from that sum).
Instead, maximizing property yields requires drafting a Triple Net (NNN) Lease.
In a strict NNN lease, the tenant pays a "Base Rent" (pure profit/debt service for the landlord), and separately assumes 100% of the financial burden for the property's operating expenses.
A meticulously drafted commercial lease must explicitly itemize exactly what the landlord can recover from the tenant via Common Area Maintenance (CAM) or Operating Expense charges:
- Property Taxes: 100% of the local municipal property and school taxes assessed on the property.
- Insurance: The landlord's specialized commercial building hazard and liability insurance premiums.
- Maintenance (CAM): Every cost associated with running the property, including snow removal in the massive parking lots, landscaping, elevator maintenance, property management fees, and security patrols.
In multi-tenant office buildings (e.g., downtown Detroit or Grand Rapids), each tenant pays their pro-rata share of the building's total NNN expenses based on their exact square footage percentage of the overall lettable area.
Critical Clauses for Michigan Landlords
Landlords often draft specific clauses regarding the building's physical condition to define responsibilities and manage potential liabilities.
1. The "As-Is" Clause
A strong commercial lease may contain an explicit clause stating the tenant accepts the premises in "its current As-Is condition, with all faults." This prevents the tenant from occupying the space and immediately demanding the landlord pay $50,000 to replace the aging HVAC units or upgrade the electrical sub-panels to support their specific heavy manufacturing machinery.
2. "Make Good" (Reinstatement) Obligations
When a commercial tenant signs a lease, they frequently gut the space, erecting partition walls, bolting heavy machinery to the concrete floor, or installing massive commercial kitchen hoods. A landlord must include a strict "Make Good" clause stating that on the final day of the lease term, the tenant must strip out all their installations and return the premises to a "bare shell" or "base building condition" entirely at their own cost. Without this clause, the landlord is left to foot the demolition bill when the tenant vacates.
3. Subleasing and Assignment
A commercial tenant cannot be allowed to simply hand over their 10-year lease obligation to a shell corporation with no assets. The lease must state that the tenant cannot assign the lease or sublease the space to a third party without the landlord's "prior written consent." Landlords often add protective language allowing them to review the new tenant's corporate financials and demand additional personal guarantees before granting that consent.
Mastering Complex NNN Reconciliations
Navigating the financial administration of a 20-tenant strip mall in Michigan requires perfect accounting. Because actual snow removal costs and property taxes fluctuate wildly every year, landlords charge "estimated" NNN fees monthly and perform a massive "Reconciliation" audit at the end of the year. Landager automatically aggregates all logged vendor invoices (from your winter plowing contractors to your Detroit property tax bills), instantly generating mathematically flawless, auditable NNN Year-End Reconciliation statements tailored to each individual tenant's pro-rata square footage.
How Landager Helps
Landager tracks lease terms, important compliance deadlines, and security deposit details - making it easy to stay compliant with Michigan regulations.
Sources & Official References
Frequently Asked Questions
▶What are the Michigan landlord-tenant laws every property owner should know?
Renting residential property in the state of Michigan requires strict adherence to a specific set of legislative acts, most notably the Landlord and Tenant Relationships Act (Act 348 of 1972) governing security deposits, and the Truth in Renting Act (Act 454 of 1978) governing lease clauses. This guide covers the essential compliance requirements for property owners and landlords.
Read the complete guide▶What is the Michigan eviction process and how long does it take?
The Michigan eviction process requires landlords to provide written notice to tenants before filing a court action. The type and length of notice depends on the reason for eviction — typically shorter for non-payment of rent and longer for lease violations or no-fault terminations. Self-help evictions (changing locks, removing belongings, shutting off utilities) are illegal in Michigan. The full court process varies but typically takes several weeks.
Read the complete guide▶What are the Michigan security deposit rules and return deadlines?
Michigan has specific rules governing how much landlords can charge for security deposits, how deposits must be held, and the deadline for returning deposits after a tenant moves out. Landlords must provide an itemized statement of any deductions made from the deposit. Failure to comply with deposit return deadlines can result in penalties and the forfeiture of the landlord's right to claim deductions.
Read the complete guide▶What are the Michigan rent increase laws and caps for landlords?
Michigan has specific rules governing when and how landlords can increase rent. During a fixed-term lease, rent generally cannot be increased unless the lease explicitly allows it. For month-to-month tenancies, landlords must provide proper written notice before an increase takes effect. Check whether Michigan has any local rent control ordinances that may impose additional caps or requirements.
Read the complete guide▶What is the grace period for late rent in Michigan?
Michigan has specific rules regarding grace periods for late rent and the amount that can be charged as a late fee. Late fee provisions must be stated in the lease agreement, and fees must be reasonable. Check Michigan state law and any applicable local ordinances for the exact grace period and late fee limits that apply to your rental property.
Read the complete guide▶What disclosures must Michigan landlords provide to tenants?
Michigan landlords must provide certain disclosures to tenants before or at the time of lease signing. Common required disclosures include lead-based paint hazards (for pre-1978 buildings, a federal requirement), the identity of the landlord or property manager, and any known material defects in the property. Additional state-specific disclosures may include flood risk, mold hazards, and environmental conditions.
Read the complete guide▶What are the Michigan lease requirements for rental properties?
Michigan recognizes both written and oral leases, though written leases are strongly recommended for terms longer than one year. Lease agreements should include the rent amount, payment due date, security deposit terms, maintenance responsibilities, and rules regarding entry, pets, and subletting. Certain lease clauses that waive tenant statutory rights may be void and unenforceable under Michigan law.
Read the complete guide▶What are Michigan landlord maintenance obligations and habitability standards?
Michigan landlords must maintain rental properties in a condition that is fit for habitation and complies with applicable building, housing, and health codes. This includes maintaining structural integrity, plumbing, heating and cooling systems, electrical systems, and pest control. Tenants typically have the right to request repairs in writing, and if repairs are not made within a reasonable time, tenants may have legal remedies available.
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