Commercial Leases 101

Do you need a commercial lease for your business? If so, this post will help you become more familiar with the provisions discussed in a typical commercial lease.

There are so many factors to consider when entering a commercial lease that can impact your business, so it is important to reach out to a real estate attorney with experience in negotiating and advising on leasing commercial property.  This list below will not sufficiently prepare you to understand or negotiate for the best lease, but it will help you be more familiar with the necessary sections of a typical commercial lease.

Here are some key things to look for in the lease agreement:
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1. Lease term: The lease should clearly state the beginning and final dates of the lease term and any renewal options.  What is the requirement for giving notice that you are leaving at the end of your lease term or if you want to renew your lease?

2. Rent and payment terms: The lease should specify the amount of rent, how and when rent is due, and any late fees or penalties for non-payment.  Is it a Triple Net Lease (NNN) which is becoming a very common lease type for commercial property? 

3. Security deposit: The lease should specify the amount of the security deposit and the conditions under which the landlord may retain it.

4. Maintenance and repairs: The lease should specify the responsibilities of the landlord and tenant for maintaining and repairing the property, including any costs that are the tenant's responsibility. What are the Common Area Maintenance (CAM) fees, and what is included in those fees? These are important to know because it means additional costs each month that are separate from your rental monthly payments.

5. Use and occupancy: The lease should specify how the tenant is allowed to use the property, any restrictions on the use of the property, and any zoning or other legal requirements. 

6. Alterations and improvements: The lease should specify whether the tenant can make alterations or improvements to the property, and if so, what procedures they must follow and who is responsible for the costs.  Who is responsible for paying for the buildout?  It is important to decide whether completing the buildout as the tenant is better or having the landlord do it. There are reasons for each option to consider.

7. Insurance and liability: The lease should specify the insurance requirements for the tenant and who is responsible for any damages or liabilities on the property.

8. Termination and default: The lease should specify the conditions under which the landlord or tenant may terminate the lease and what happens in case of a default by either party.
 
It's essential to review and negotiate the terms of a commercial lease carefully before signing. Speaking with a real estate attorney is a good idea because many of these terms can be negotiated, and unfortunately, many clients seek an attorney when they have broken the lease or after an issue arises, knowing what to expect and what you are responsible for under the lease terms is vital, so you do not breach it.
 
The lease for a commercial tenancy is the guideline that both landlord and tenant must follow, so, as a tenant, you should also understand what the landlord is responsible for and what remedies you may have if they are not following the lease. By understanding the terms of the lease and protecting your interests, you can help ensure a successful and profitable leasing experience.
 
For more information about Triple Net Leases and Common Area Maintenance, click the links: 
https://rb.gy/xc2rp
https://rb.gy/d3pfm

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