Are you considering opening a small business in Florida, or starting a company with partners?
No matter what type of business you are thinking about, you will most likely need a commercial space from which to run your business.
Renting a commercial space can feel daunting, and understanding the terms of a commercial lease can be complicated, particularly if you are new to Florida’s nonresidential landlord-tenant law.
To be clear, while residential and commercial leases do have some similarities, these documents also have a lot of differences.
When you are drafting and reviewing a commercial lease, it is important to understand the distinctions between residential and nonresidential lease agreements, and to be sure that your lease provides the protections you need.
At BrewerLong, we can assist you with all aspects of your company, from initial business formation through dissolving a business. An experienced Florida business lawyer at our firm can speak with you today about drafting and reviewing a commercial lease agreement.
Learning More About Distinctions Between Commercial and Residential Leases
The first step in learning how to review a commercial lease agreement is to understand the distinctions between commercial and residential leases or, as they are defined under Florida law, nonresidential and residential lease agreements. The following are some important distinctions that you should know:
Fewer Legal Protections
The same consumer protection laws do not apply to commercial lease agreements. When you enter into a residential lease agreement, there are often a variety of consumer protection laws that prevent a landlord from engaging in certain actions or behaviors with regard to a tenant or the property.
Florida law concerning nonresidential lease agreements, similar to other states, does not provide the same level of consumer protection associated with residential lease agreements.
Lack of Standardization
Many residential lease agreements use standard forms that have language many tenants have come to understand as a result of renting homes or apartments in Florida.
Differently, most commercial lease agreements do not rely on standard forms largely because the needs of business tenants and commercial real estate owners vary widely.
Accordingly, when you are drafting, negotiating, and signing a commercial lease agreement, it is extremely important to be sure that you understand each and every term in the lease and how it will apply to you.
While most residential lease agreements do not involve a significant amount of—if any—negotiation between the landlord and the tenant, commercial lease agreements are much different.
To be sure, negotiation of terms is typical in commercial lease agreements. You should know that it is common to negotiate terms, such as the amount of rent, how and when rent increases will occur, the length of the lease term, and many other issues.
Length of Lease
In most situations, residential leases are for a one-year period. This is different for commercial leases, which typically last for more than one year (and may in fact have a lease length of several years).
While a residential tenant may be able to include a clause in a lease that allows that tenant to terminate with a particular amount of notice (such as 60 days, for example), most commercial leases are more binding. Further, if you terminate a commercial lease early as a tenant, you may face significant financial costs.
Commercial Lease Agreement Checklist
When you are negotiating the terms of a commercial lease agreement, what kinds of terms do you want to ensure will be included in the contract?
Since the terms of commercial leases vary widely depending upon the needs of both the landlord and the tenant, it is important to make sure that the terms of your commercial lease fit the needs of your business.
For example, is the space what you need in order to set up your business? Are you permitted to install signs and other fixtures that are necessary for your company to attract customers? Is the lease term appropriate if you are just starting out and are not yet certain about the best type of space for your business?
As you think about the types of lease terms you need, you should consider the following commercial lease agreement checklist:
- Lease term;
- Renewal options for the lease;
- Rent amount;
- Rent increases, or escalations, including when and how those will be calculated;
- Inclusion of insurance, property taxes, and other maintenance costs in your lease (or will you need to pay for these things yourself?);
- Amount of the security deposit;
- How and when the security deposit will be returned;
- Details of all of the space you are leasing (including, for example, rest rooms or hallways);
- Terms for improvements of the space made by the landlord;
- Modifications that are permitted;
- Whether and where you can hang signs;
- Who is responsible for paying for improvements or modifications;
- Accessibility issues (if you will be employing more than 15 people, the Americans with Disabilities Act (ADA) requires your business to be accessible to persons with disabilities, which may require improvements or modifications like ramps or wider doorways);
- Whether subleasing is permitted;
- Option to renew the lease;
- Termination of lease (e.g., notice requirements, penalties); and
- How disputes will be handled (e.g., mediation, arbitration).
Contact a Business Law Attorney in Florida
If you need assistance with a commercial lease, a Florida business law attorney at our firm can assist you. Contact BrewerLong to get started.