Commercial leases are NOT residential leases. There are four major ways that commercial leases differ from their residential counterparts. First, commercial leases are not subject to most consumer protection laws that apply to residential leases – the law assumes that you know what you are getting into. Second, there are no standard forms for a commercial lease agreement and each is customized for the landlord’s needs, not the tenant. Third, the commercial lease is typically long-term, binding and involves larger amounts of money, so there is potentially a lot on the line. Fourth, commercial leases generally have more negotiation between business owners and the landlords.
A commercial lease may help make, or break, your business. Before you sign a lease agreement, you should understand what you are looking at. At a minimum you need to understand and agree to the most basic terms of the lease – the amount of the rent, how long the lease is and the boundaries of the space.
A few general issues you should be aware of are:
(1) Rent. What is the initial rent? How is future rent computed?
(2) Time. How long is the lease? Can it be renewed?
(3) Insurance, property taxes and maintenance costs. Are those included in your rent or will they be charged separately?
(4) Deposit. How much is it? What are the conditions for its return?
(5) Space. What are the boundaries of the space? Are there common access areas?
(6) Improvements. Will there be modifications or fixtures added? Who pays for them? What happens to them at the end of the lease?
(7) Signs. What size, type and location is available for signage?
(8) A/C & Heat. Who maintains and repairs them?
(9) Sublease. Can you assign or sublease the lease?
(10) Renewal. Can you renew or expand the space if needed?
(11) Termination. How can the lease be terminated? What are the notice requirements? Are there penalties for terminating?
(12) Disputes. Are disputes required to go to mediation or arbitration?
(13) ADA. Who is responsible for modification that may be required to comply with The Americans with Disabilities Act?
Commercial leases are complex and we always recommend having an attorney review your commercial lease and for negotiations on your behalf. If you have any questions, please contact us at (800)303-1386 or by email to Erin@Zebell-Law.com.