What is an Agreement for Lease of a Parking Space?
A parking space lease agreement is a legal contract between a landlord and an individual, usually a tenant of the property or an individual seeking to use the parking space for a specific duration. The primary purpose of the parking space lease agreement is to outline the terms of the lease for a specific space in a lot owned or managed by the landlord. In fact , it may be a small portion of a larger document that includes other leasing arrangements.
The agreement typically contains all applicable rules for use of the parking space so that the tenant is aware of the terms of use and how the space may or may not be used. For example, a parking space lease may prohibit the sub-leasing of the space to another party, or the keeping of non-vehicle items in the space. It may outline payment terms, such as when rent is due and what methods of payment are accepted. The agreement is legally binding and if the terms are not met then the landlord has the right to end the agreement.
Essential Elements of a Parking Space Lease
It goes without saying that all parking space lease agreements should spell out some of the most important terms of the deal. The following terms are the keys to a successful parking lease agreement:
Lease Term
The term of the lease is critical for both parties. The Tenant wants a long term so they are assured occupancy and the Landlord wants a short term so they are not locked into a long term agreement if the space becomes vacant. A term of three years or less with notice at the end of each year to renew is an acceptable alternative.
Pricing
The payment of rent for the parking space is the main consideration in the lease relationship. You may want to consider indexing the rent to some revenue index such as an increase in the CPI or to any increase in rent in the Property to which the garage is attached. The rent should be paid monthly or quarterly in advance by check.
Use Conditions
A parking space should be used only for parking of a passenger vehicle. The vehicle should be registered to the Tenant. The lease agreement should provide for the eviction/relocation of tenants who hold long distances slots. The lease should provide that the Tenant has no rights as to any other areas of the garage other than the space leased to it. These areas should be identified by the Landlord to prevent any use issues from arising. It is also advantageous for the lease to be clear about the Landlords ability to terminate tenancy for nuisance.
Advantages of Leasing a Parking Space
While the flexibility and lack of legwork of an informal parking situation can be alluring, you may want to consider making your arrangement a bit more formal with the creation of a lease agreement. Though it may seem like a hassle now, it can be beneficial to both parties long-term if issues ever come up. For starters, a verbal or informal agreement does not actually provide legal assurance to either party. Therefore, informal contracts often lead to partner misunderstandings and potential litigation. There are plenty of "what-ifs" and surprises that can occur in a informal contract that could result in expenses to both parties. In the event that the party that leases out the parking space decides to use it for themselves or on-sell it to another party, there is no legal consequence. With a written contract, lessors will have peace of mind knowing their income from the parking space is secure and lessees will have the same reassurance in knowing they have access to their space on any given day of the week. In addition, an enforceable lease will prevent the lessor from charging a second-party for fees higher than originally agreed upon.
A formal parking space lease agreement will also ease concerns about unauthorized usage of the designated area. When a person other than the lessee uses the space, it can cause inequities in both parties and may result in a loss of income and legal rights. As such, the lessor could claim a breach of contract from the lesse, and that may be a legally valid claim under state law. Without a written contract, the lessor should be prepared to lose income and the right to enforce that the space is not used without authorization.
Another important feature of a written contract is the fact that it can be enforced in a court of law and can guide the party in deciding how to handle parking issues. For example, a written lease can help ensure that the lessor does not rent the same space to two different people. If it is necessary to cancel the contract, the lessor should give as much notice as possible. Once the lease expires, the space is immediately available to the lessor and they can freely re-offer it to other parties.
Legal and Regulatory Issues to Consider
Parking space lease agreements are bound by legal requirements and regulations that vary depending on the jurisdiction. In many countries, regulations such as the Fair Trading Act 1989 (NSW) and the Australian Consumer Law operate to protect lessees of parking space leases, such as by requiring parking space leases to be fair, not oppressive, and not unconscionable. Legislations governing retailers and commercial tenants may also apply to a commercial parking space lease, subject to specific exceptions.
The Fair Trading Act 1989 (NSW) requires that parking space lease agreements include mandatory contract terms that must be adhered to. These terms include, amongst others:
Retail leases may also be regulated by legislation that is unique to each Australian state or territory. In New South Wales, the Retail Leases Act 1994 provides for regulations and code of conduct obligations that may apply to the owners of retail centres. For example, the code of conduct requires owners of retail shopping centres to act in good faith, fairly and honestly, and not to engage in misleading or deceptive conduct. The code also contains requirements concerning the payment of cash contributions for marketing, promotions, security and repairs to common premises.
Each jurisdiction also has its own taxation requirements. These may apply to parking space lease agreements as follows:
In New South Wales, stamp duty applies to parking space lease agreements under the Duties Act 1997. Accordingly, owners of a parking space must pay stamp duty on the parking space lease agreement. The amount of duty and which party is responsible for paying the duty will depend, in part, on whether land tax is payable on the parking space. For example, owners of parking spaces for which land tax is payable must pay duty on the total contract value of any parking space lease agreements. However, owners of parking spaces for which land tax is not payable will only be required to pay duty on an annual value for the first ten years of a parking space lease agreement.
The laws concerning the registration of parking space lease agreements to land vary among jurisdictions. In many states, registration of parking space lease agreements is not compulsory and contacting the relevant land registry office of the relevant state or territory will provide the most reliable and up-to-date guidance on parking space lease obligations.
Common Issues and How to Solve Them
In addition to the challenges of juggling common spaces and navigating local ordinances, each party entering into a parking space lease agreement needs to evaluate the use of the space, who is responsible for construction, and how to address common problems that arise in the use of the space.
As an example, a strip center often collectively owns the parking spaces. While this is not a problem when the spaces are not developed and are simply used for driving (like a street), if there is a parking garage in a strip center there are three primary concerns:
Another problem that arises, particularly in residential leases, is the allocation of the parking spaces. A lot of tenants engage in a lottery system to allow tenants to pick spaces, and others simply draw spaces by location. This is something that needs to be addressed in the parking space lease agreement.
In addition to allocating spaces , landlords and tenants periodically do not know who to talk to when there is a broken parking space gate or there is a broken light or weed that needs to be removed. This is why it is very important to have a detailed process by which tenants can go when there is an issue.
Finally, there is a common question in leases regarding who has control over the spaces. As a general rule, landlords have control over the spaces and can tell anyone that uses the spaces to vacate. We have represented a number of clients who have had to evict people from the parking spaces or parking garages because they are trespassing. The issue that we run into very frequently is that tenants assert that they can use parking spaces even if they have not rented them. This problem commonly occurs with respect to residential landlords because there are sometimes illegal tenants that do not vacate who continue to use the parking spaces.
No matter what issues arise, it is critical to deal with them in your parking space lease agreements even if you simply reference other agreements by contract.
Tips for Drafting a Parking Space Lease
The first step is to determine whether you need a parking space lease or if a license agreement will be appropriate. If the parking space is located on property that is otherwise licensed, a license may be appropriate. In addition, if the right to park in the parking space is created by another document such as a condominium declaration or proprietary lease, a condominium parking space lease agreement should be adopted.
If a parking space lease format is appropriate, the following provisions should be briefly described:
• Grant of License: This section can be either a detailed narrative granting a right to use a specific space to a tenant, or the reservation of a right to use a space for an Owner’s own use.
• Term of Use: The lease term should commence on the same day as the tenant’s lease and end on the last day of the tenant’s lease. Leases may be month-to-month rather than subject to the term of an Owner’s lease.
• Rent: The parking space may be offered at no charge or be subject to monthly rent payments. The rent provisions become critical if the building is under a property tax abatement, subject to New York City’s commercial rent tax or other special tax assessment.
• Rights of Owner: Section 1 entitled Reservation of Rights would give an Owner the right to terminate the lease for failure to pay rent, for any violation of the provisions of the condominium declaration, proprietary lease or bylaws, or for failure to repair the premises.
• Insurance: An insurance endorsement can be obtained from a tenant that contains additional insured language and contractual liability coverage for a building Owner. It is critical to assess the lease provisions with respect to various liability coverage provisions in the Proprietary Lease and or the condominium bylaws.
• Indemnification Clause: Many Owners included clauses in Proprietary Leases and condominium bylaws that would have tenants indemnify Owners. This clause should be reviewed to determine whether a parking tenant has a right of indemnity against the Owner or vice versa. It may be appropriate to amend the unamended version of the indemnification clause to make it reciprocal.
• Default Provisions: The default provisions should require a notice to cure and the right of the Landlord to enter the premises to cure any default if the tenant does not do so within a set period of time and to recover the cost of cure from the Tenant. A right of entry to inspect is also recommended.
• First Right of Refusal: A Condominium Owner may wish to include a provision giving him/her the right to purchase the parking space if the parking space becomes available for sale. If the Owner elects to sell the parking space, the right of first refusal should be exercised no later than the 30th day after notice is given to the tenant.
• Alterations: This provision should limit the ability of a tenant to make any alterations to the parking space.
• Transfer Restrictions: An Owner may wish to prohibit subleasing or assignment of the unit for use as a parking space. Care should be taken to allow an assignment to a purchaser of the unit. In a condominium, a parking space may be sold separately. If a parking space is regulated by a proprietary lease, the parking space may not be sold separately from the unit.
Common Questions About Agreements for Lease of a Parking Space
What is a parking space lease? – A lease agreement that gives the tenant the right to use a parking space as opposed to a parking garage. Commonly used in city blocks or for commercial spaces that lack extensive parking facilities.
How do parking space leases differ from parking garage agreements? – Parking space leases deal with open lots and other premises reserved for the common use of tenants, whereas parking garage agreements deal with the leasing of premises that consist of a structure or building . Some parking lots may have garages but they are similar to a lease or license to park a motor vehicle inside a garage.
When do you need to enter into a parking space lease? – If the ownership of a building/land requires tenants/employees/guests to park somewhere specific as a condition of their tenancy/employment/visitation, then the owner must enter into a parking space lease with the tenant/employee/guest.
Where can I obtain a parking space lease template? – A good starting point for a free template for a parking space lease is here.