Whether you are starting a brand new business or opening a branch at a new location, signing a new lease agreement can be a complicated undertaking.
Before inking a commercial lease contract, it is important that you do your homework and arm yourself with as much knowledge as possible. Here are three major things you need to look out for when signing a commercial lease contract (Commercial leases are NOT standard and many of the terms are negotiable – if you ask:
Use and the exclusive use clauses
A use clause stipulates what you can (and cannot) do on the commercial property. For instance, if you plan on operating a restaurant, then the use clause will require you to do just that. Sometimes, the lease contract may be specific to the kinds of food you will be vending, the specific menus as well as the restaurant’s business hours. Using the leased property for anything other than what is specified in the contract can cause problems.
An exclusive clause, on the other hand, is common in shopping centers or mall leases. This clause allows the tenant to have exclusive rights to a certain area of the market or mall. For instance, a tattoo shop may not want the landlord to lease a shop within the building to another tattoo artist.
The specifics of the lease
Be wary of remarks like, “we will address this after signing the lease,” or “the other tenants are okay with that.” It is in your best interest that you approach the lease with the mindset that you need to go through every line and make sure that you completely understand what that means for your future and your wallet.
Likewise, always insist that any oral promises are backed up with some documentation. Remember, if it is not written down, it’s going to be hard to enforce.
Many commercial leases today include a pass through of landlord expenses CAM (Common area maintenance) and Real Estate tax charges. These costs are in addition to a base rent and often don’t have a cap on increases and over the life of a commercial lease can increase substantially. Also carefully review what expenses will be paid by the tenant and what expenses are to be paid by the Landlord, Many commercial leases require the tenant to replace the HVAC system servicing the leased premises even if a new system wasn’t provided at the start of the lease.
One of the most critical aspects of running a business is leasing property. And make no mistake; there are very landlord favorable leases out there. Find out how you can safeguard your rights and interests while signing a commercial lease contract.