You’re starting a business, and you need a commercial location. Perhaps your business is growing, and you need more space.
If you’ve never signed one before, undertaking a commercial lease review on your own can be nerve-wracking. Even if you’re an experienced commercial tenant, the specifics of your lease will change based on what the landlord wants.
Here, we’ll go over the most important items to examine in your commercial lease review before signing on the dotted line.
The Premises Description
In a residential lease, the description of the premises (or, more simply, the address) is usually the last thing that would cause worry. In a commercial lease, it’s the first thing you should check.
Commercial properties are unique. Always make sure you are getting exactly what you wanted, including square footage and amenities.
How is your rent calculated? In a commercial lease, there are all different types of rent payments to be aware of.
Usually, there is the base rent (what you agree to pay for the space rental), as well as additional fees. The additional fees can include portions of the property taxes, property insurance, and property maintenance costs.
Sometimes, landlords may even ask commercial tenants to pay for extra building expenses.
For retail spaces, often the total rent equals a base rent plus a percentage of the tenant’s earnings.
You’ll want to carefully review the section on rent to ensure you understand how the landlord is calculating it, as well as how the landlord may increase it in the future.
Repairs and Improvements
Who is responsible for paying for repairs or improvements to the premises? In a commercial lease, it’s always a good idea to negotiate the least amount of personal financial responsibility for repairs and improvements.
Accoridng to BrewerLong Attorney, Michael Long:
Commerical tentants can often be suprised by their responsible to pay osts associated with repair and replacement of building systems, like plumbing, electrical, and HVAC. It’s critical for tentants to their obligations under the lease.
Additionally, you should be clear on which party is responsible for any construction prior to move-in.
Rules and Resctrictions
As a commercial business, you’ll want to put up signage and make sure you can advertise. You’ll also want to be sure that a competing business won’t move in right next door to you. The portions of the lease that govern rules and restrictions are significant to both the landlord and the tenant.
It’s also a good idea to make sure the landlord is not trying to prevent you from opening another business in a specific radius from your current lease.
CAM stands for “common area maintenance.” This section requires careful review to ensure that you are paying for common area maintenance in proportion to the space you are leasing and no more. Often, landlords will have a broad description of CAM fees to get their tenants to shoulder more of the building costs and expenses. It is, therefore, critical to negotiate this with your landlord.
Term, Termination, Assignment, and Sublease Options
How will you get out of the lease if your business doesn’t work out? Will you be able to assign the lease to another party, or perhaps, sublet it? The answers to these questions will be found in several different clauses across your lease.
Whatever your goals are for your business (including, perhaps, the ability to close it at any point in time), you’ll need to ensure the lease serves those goals through a careful review.
Finally, how will you and the landlord resolve any differences that come up? Can you go to court, or will you be forced into arbitration? Usually, commercial leases have arbitration provisions, which say that you will solve any disputes through a neutral arbitrator outside of the court system. You’ll want to make sure that you can participate in this process and that the arbitrator is not pre-selected by the landlord.
Why it’s Best to Hire an Attorney
You may be feeling overwhelmed by all of the complicated terms which can exist in your commercial lease. Instead of trying to tackle all of this yourself, it’s a good idea to let an experienced real estate attorney help with your commercial lease review. Navigating the legal and financial minefield of a commercial lease can be done a lot more easily with an experienced attorney by your side.
When you decide to hire a lawyer in your state, you can get help understanding the complex legal issues in the lease. You can also discuss any verbal assurances your landlord has made to ensure that your attorney gets them into the final lease agreement.
No matter what, your attorney can make notes on what they think of the lease and help you negotiate it.
In our experience, even landlords who have a “take it or leave it” attitude become more reasonable and cooperative after they receive an attorney’s comments on the lease.
Contact BrewerLong Today for A Commercial Lease Review
Commercial leases are complex. An experienced contract attorney knows which lease terms are standard, which can be negotiated and which should be added to the landlord’s draft to limit your costs and liabilities, reduce risks and facilitate a smooth landlord/tenant relationship.
To schedule review of a commercial lease, call our office at 407-660-2964, contact us online, or email Calla Portillo at firstname.lastname@example.org.