Michigan Commercial Leases: Key Clauses & NNN Structures

Unlike residential leases that must rigidly comply with the Truth in Renting Act and cannot waive a tenant's statutory rights, drafting a commercial lease in Michigan offers the ultimate freedom. The commercial lease agreement operates as the absolute, overriding authority governing the relationship between the landlord and the business entity.

If a clause isn't explicitly written into the commercial lease, it essentially doesn't exist in Michigan courts.

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:

1. Property Taxes: 100% of the local municipal property and school taxes assessed on the property.
2. Insurance: The landlord's specialized commercial building hazard and liability insurance premiums.
3. 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

Because the "implied warranty of habitability" does not exist in commercial law, landlords must draft extremely specific clauses regarding the building's physical condition to protect themselves from tenant lawsuits.

1. The "As-Is" Clause

A strong commercial lease must 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.

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