Leasing commercial space instead of buying a commercial property is often the best option available. Those trying to grow an existing company or establish a new organization may not have access to the financing necessary to purchase facilities. They may need the flexibility of trying different locations or having the ability to walk away from the property eventually if the company fails.
Commercial leases help ensure that business owners and executives have access to retail facilities, manufacturing space or offices in which they can operate. Those leases imposed numerous legal obligations on the business. Those hoping to rent commercial properties may need to review certain details about the lease carefully before signing it.
What terms should business leaders take particular care to validate when evaluating a commercial lease?
Lease duration
Commercial leases often last much longer than residential leases. It is relatively common for commercial leases to last at least two years, if not substantially longer. Ensuring that the company does not overcommit itself can be crucial, as long-term lease obligations can cause financial hardship for a business that doesn’t succeed at a new location or a business owner whose company fails.
Limits on tenant conduct
Leases may contain a number of different clauses that restrict the activities of commercial tenants. For example, landlords may limit the company to specific types of operations. They may allow for consulting out of an office but may not allow consumers to visit the facility directly. They may forbid lease assignments in the event that the space does not work for the tenant. Reviewing how the lease restricts the tenant can be important during lease negotiations.
Maintenance costs and responsibilities
There are many ways for commercial landlords to address facility maintenance and repairs. In some cases where they lease stand-alone properties, the tenant may sign a triple net lease that makes them responsible for all maintenance and repairs, as well as all costs associated with maintenance. Other times, landlords may provide maintenance and repair services, but they may charge the tenant for those services. Determining what responsibilities the tenant has is crucial when evaluating a commercial lease.
Prospective tenants can sometimes negotiate with landlords to secure better terms. A thorough review of a commercial lease with a skilled legal team may prove that the property isn’t right for them. Business leaders may need help with the process of reading a lease and negotiating with a landlord to ensure optimal protection throughout the duration of the lease, and that’s okay.