Perhaps you are starting a new business or your current business has outgrown your garage and it’s time to get a commercial location. If so, congratulations. However, before you agree to anything in a commercial lease agreement, make sure you know what you’re getting yourself into when you rent space for your business.
Renting commercial space is a big responsibility. The terms of your lease can have an impact on the success or failure of your business. Even before you contact a landlord, you are best served to understand how commercial leases differ from the residential type. Before you sign anything, make sure you fully understand and agree to the basic terms of the lease such as rent amount, length of lease and requirements of the physical space.
Commercial leases differ from residential leases in many ways. Some examples include:
• Limited consumer protection laws. Unlike residential leases, commercial leases are not subject to most consumer protection laws that regulate residential leases such as tenant’s privacy and caps on deposits.
• They are long-term and binding. A commercial lease is generally for several years at a time and you cannot easily break or change it. It is a legally binding contract and a good deal of money can be at stake.
• No standardized forms. Many commercial leases are not based on a standardized form or agreement and instead are customized to the landlord’s needs. This means that every aspect of the lease needs to be carefully examined.
There are also many terms that you will want to carefully consider and negotiate before agreeing to a lease. They can include:
• The length of lease, when it starts and whether are any renewal options
• Amount of rent including allowable increases and how those are calculated
• Whether the rent you pay covers insurance, property taxes and maintenance costs or are you going to be charged separately for those items.
• The security deposit and conditions for its return.
• Who maintains and repairs the property, you or the landlord.
• Whether improvements, modifications or fixtures added to the space are allowed, who pays for them and who will own them after the lease ends.
• Whether the lease can be assigned or subleased to another tenant.
• Details on exactly what space you are renting (i.e. common areas such as rest rooms, elevators) and how the space is measured.
• Details about signage including where you may put them
• Options to renew or expand the space you are renting.
• If and how the lease may be terminated including notice requirements and any penalties for early termination.
• Whether disputes must be mediated or arbitrated.
• Limitations, if any, on the landlord renting space in the same location to a business that would be a direct competitor to your business.
• Does the space comply with The Americans with Disabilities Act (ADA)? The ADA requires all businesses that are open to the public or that employ more than 15 people to have premises that are accessible to disabled people. Make sure you and the landlord are in agreement on who will pay for any modifications that may need to be made such as installing ramps or widening doorways.
To make sure you secure the best lease terms that fits your business, an experienced attorney who understands the nuances of commercial leasing is your best bet for peace of mind and helping to avoid any headaches down the road. For more in depth information on negotiating commercial lease terms and assistance to make sure the terms are the most advantageous for you and your business, contact a member of the experienced Business Law team at Udall Law Firm, LLP. A list of attorneys ready to guide you can be found here.
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