Commercial Lease 101:
Commercial Real Estate Lease Attorneys
Leasing commercial space is a huge responsibility and when it is time to draft a commercial lease, the Gateville Law Firm, is your go-to law firm. We specialize in drafting commercial leases, before you approach a property manager, you should have a complete understanding how commercial leases differ from residential leases.
The Difference between a Commercial Lease and a Residential Lease
It’s very important to understand from the very beginning how commercial leases and residential leases are very different. Below are the distinctions between a commercial and residential lease:
Consumer protection laws: A commercial lease is not subject to the majority of consumer protection laws that govern residential leases. An example would be there are no caps on security deposits or clauses regarding tenant privacy.
There are no standard forms: Commercial leases are not comprised of a “standard lease form”. Each commercial lease is drafted to meet the property manager or landlord’s specifications. As the Lessee and Tenant, you will need to carefully review any commercial lease agreement offered to you.
Commercial Leases are long-term and legally binding: Unlike a residential lease, when you enter into a commercial lease, it’s very hard to break or modify a commercial lease agreement. It is a legally binding contract/agreement, with a large sum of money at stake.
The ability to negotiate and lease flexibility: Although a commercial lease agreement is generally subject to negotiation between the business owners and the property manager/landlord, many businesses require special features for their particular business purposes. An experienced commercial lease attorney will be able to counsel and assist you with any lease addendums.
Be certain the commercial lease is a good fit for your business
Before you sign a lease agreement, you should make an appointment with an attorney, review and investigate all lease terms to make absolutely certain the lease meets your business’s needs.
The first item of business is the amount of rent. Make sure you can afford to pay the monthly rental amount. Secondly, the length of the lease; maybe you really do not wish to tie yourself into five, six- or ten-year lease. You may later discover that your business may grow faster, and/or the location may not work out for you. A short-term lease with renewal options is usually safer. Once again, an attorney experienced in drafting and negotiating commercial leases is your best bet.
Another consideration is the physical space of the property (building, loading docks and parking). If your business is going to require modifications to the existing space, be sure that you and the property manager or landlord will be able to accommodate all necessary changes.
Miscellaneous and less conspicuous items disclosed in the lease may be very important to your business’s success. For example, if you expect your computer repair business to depend largely on foot traffic (walk-in customers), make sure that your lease allows you the right to erect a sign that’s visible from the street. If you are counting on being the only computer repair shop inside a new business complex, you’ll want to be sure your lease prevents the property manager or landlord from offering a lease to a competitor (commonly referred to as a “non-compete clause”).
Important Lease Terms
The following items are often included in many commercial leases. It is of utmost importance to pay close attention to following:
- The term of lease. When does the term begin, are there renewal options and when does the lease expire?
- The amount of rent payments, the due date, grace period, allowable increases (also called escalations) and any percentages of rental increases.
- Does the lease agreement require the tenant (in addition to rent payments) the inclusion of insurance, property taxes, and maintenance costs (“gross lease”); or whether you will be assessed for these items separately (“net lease”).
- The terms regarding the security deposit plus the conditions for the return of the security deposit.
- The exact amount of square footage of the space you will be leasing, including common areas such as hallways, rest rooms, storage areas, and how the property manager, landlord or building owner measures the space.
- Will there will be improvements, modifications (build outs when new space is being finished to your specifications), fixtures added to the space; who will be paying for the finishing, modifications and additions of certain fixtures, and lastly, who will own them after the expiration of the term of the lease.
- Any specifications for signs or signage, where they may or may not be erected.
- Who is responsible for maintenance and repairs to the premises, including plumbing, electrical and the heating and air conditioning systems? This needs to be fully disclosed in the lease.
- Whether the tenant is able to assign or sublet to another tenant.
- Whether there is an option to renew the lease or allow for expansion of the space you are currently renting.
- How the lease may be terminated, including notice mandatory requirements, and a full disclosure of all penalties for early termination, and
- If a dispute arises between the tenant, property manager or landlord, will disputes be mediated or arbitrated as an alternative to court.
BACKGROUND OF GATEVILLE LAW FIRM
If you are a current business owner or if you are starting up a business and have chosen a building or office space for your business, call Gateville Law Firm today. We are qualified, experienced attorneys in the area of commercial lease and business law.
Call (630) 780-1034 or email us directly at Sean@GatevilleLawFirm.com