10 Things You Should Know Before Signing a Commercial Lease
Before you ink the deal on a commercial lease, it’s crucial to arm yourself with knowledge and prepare for negotiations. The following are key considerations every business owner should be aware of to ensure they are making an informed decision:
1. Total Cost
Beyond the base rent, be aware of additional costs such as Common Area Maintenance (CAM) fees, property taxes, insurance, and utilities. These can significantly affect your total monthly expenditure. Ensure all these costs are clearly outlined in the lease.
2. Lease Type
Understand the specific type of lease you are entering into. Is it a triple net lease, a modified gross lease, or a full-service gross lease? Each type distributes the costs and responsibilities between the landlord and tenant differently, influencing long-term financial planning.
3. Lease Duration
Committing to a lease term should align with your business plan. Shorter leases provide more flexibility, whereas longer leases might offer stability but less freedom to move or expand. Additionally, check if there are renewal options and what conditions apply to them.
4. Space Usage
Confirm that the lease agreement explicitly allows for the type of business you intend to run in the space. This includes checking zoning laws and understanding any restrictions imposed by the lease or local regulations.
5. Improvements and Modifications
Determine your rights to alter or improve the leased space to suit your business needs. Who bears the cost of these improvements? Can they be removed, or must they remain at the end of the lease term?
6. Sublease and Assignment Rights
Life is unpredictable, and business needs change. Ensure you have the option to sublease the space or assign the lease to another business, providing a safety net if you need to relocate or close.
7. Exit and Termination Options
Understand the circumstances under which you can legally terminate the lease early and know the penalties associated with such decisions. Look for or negotiate a clause that limits penalties if you have a legitimate reason for early termination.
8. Maintenance and Repairs
Clarify what your obligations are regarding maintenance and repair. Are you responsible for systems like air conditioning, plumbing, or electrical? Knowing these details can help avoid unexpected expenses down the line.
9. Dispute Resolution
Consider how disputes will be handled should they arise. Some leases include mediation or arbitration clauses to resolve conflicts, which can be quicker and less expensive than court proceedings.
10. Legal Review
Always have a commercial lease attorney review the document before you sign it. Our legal team can spot unfavorable terms, suggest beneficial amendments, and help negotiate better terms.
Understanding these aspects can protect you from unforeseen liabilities and ensure that the commercial space you choose is beneficial, not burdensome, to your business operations.
Speak With the Business Lawyers at TOSC Today
Before you sign a commercial lease, it’s essential to consult the lawyers of Taylor Odachowski Schmidt & Crossland, LLC (TOSC), which specializes in commercial real estate. Our legal team will review the lease terms, identify any unfavorable conditions, and negotiate amendments that better protect your interests. This proactive step saves you from potential legal headaches and financial burdens down the line.
If you find yourself bound to an unfavorable lease, we can advise you on legal options available for renegotiating the terms or, if necessary, legally exiting the lease. Contact us today at (912) 634-0955 or fill out a contact form to review your lease agreement and explore all your legal options.
