Signing a Commercial Lease

Are you considering renting space for your business? Before you sign a commercial lease, there are a number of things you should consider.

Not the Same as a Residential Lease

Commercial leases have a number of differences from residential leases. A major difference is that most consumer protection laws do not apply to commercial leases. The paperwork used for these leases is not standardized, which means that you need to carefully study every portion of the contract. A commercial lease agreement is legally binding and cannot easily be broken. You may even need to sign a personal guarantee, which says that you (or another officer of the company) will personally cover the remaining rent payments if the business fails. On the positive side, commercial leases typically allow for much more negotiation in terms and amenities. Especially when a landlord is eager to rent the space, you may be able to obtain some very favorable considerations.

Terms of the Lease

Since this type of agreement is legally binding and usually involves a large financial commitment, the terms of a commercial lease are very important. The amount of the rent is an obvious consideration, but there are several accompanying factors. How is the rent calculated? Typically it should be the number of square feet multiplied by the cost per square foot divided into twelve monthly payments. Can your landlord increase the rent? How often? Does he have to give you an explanation? Is there any cap on the amount? What does the rent include? Does it cover property taxes and insurance? Who pays for maintenance costs?

Other things to consider include regulations regarding outside signage and agreements concerning rental of space in the building to your competitors. Often, you can negotiate changes to be made to the space to make it fit your needs. However, if such modifications are done, the agreement should specify exactly what they entail, who pays for them, and who owns them after their completion. If the rental location includes space held in common with other tenants, the contract should specify the party responsible for maintaining and restocking these areas. Of course, the lease should also include guidelines for renewal, termination, and mediation.

As you can see, there are many details that make up a commercial lease agreement. It is definitely not something into which to enter hastily. Contact the Witkon Law office today. We are experienced in negotiating commercial leases and can help protect you from the large financial cost that can accompany innocent mistakes.