Most businesses don’t have the resources to buy their buildings, so they enter commercial leases. These documents could be long and complicated, depending on the nature of the space, how large it is, and what you want to use it for. You could be well served by having a real estate attorney review the contract and answer your questions. Don’t sign a lease or any other contract if you don’t fully understand it.
Many attorneys have experience with negotiations. If you’re not comfortable with or feel confident with negotiating, you may be able to get a better lease deal when your attorney acts as your negotiator. Depending on the issues and the potential costs, if you disagree with your commercial landlord, legal representation may be money well spent when one of your significant costs and the home of your business is at issue.
Some issues that a commercial lease should cover include:
- The terms and conditions must be clearly defined and agreed upon by both parties. This includes rent costs, lease length, renewal options, and the parties’ obligations or restrictions. If you need any special accommodation for your business, make sure it’s in the lease
- Issues may come up concerning the rent amount, frequency of payments, and the conditions when rent can increase. You must understand rent escalation clauses and how they may apply
- Who is responsible for maintenance, repairs, and improvements to the property under what conditions should be clearly stated in the lease? You want the lease to prevent future disputes over who is responsible for what maintenance or repair and when
- Your lease may specify the premises’ permitted uses. Violations can lead to legal issues, especially if you change the use without your landlord’s consent
- If you want to change or improve the property, the lease should state how this can be done, who pays the costs, who can perform it, and whether prior landlord approval is needed
- The lease should cover whether subleasing or assigning the lease to another party is allowed and under what conditions
- Procedures and consequences for default on rent payments should be clearly outlined. The eviction process should also be included
- The lease should cover which party must obtain insurance coverage for the property and who may be liable for damages or losses at the premises
- Both parties must comply with applicable laws, regulations, and ordinances. The lease should state the parties’ responsibilities for compliance and the consequences for failing to do so
- The lease should include language covering how you might leave the property before the lease expires, what you would have to pay and do to accomplish this
- The lease should cover how disputes will be resolved. This can include mediation, arbitration, or litigation, and which jurisdiction’s laws will apply. Mandatory arbitration clauses are common in commercial leases, so litigation may not be an option
In addition to state laws and local ordinances, your commercial lease is the set of ground rules for your use of the property and the landlord’s obligations. Our friends at Focus Law LA will tell you, you must fully understand how this will affect your finances and business, especially if this is a long-term agreement that you may need to live with for several years.