Finding the perfect location is the first big step towards opening your business. What happens next? Although you’re probably eager to set your plans in motion, you may not be thrilled to see an 80-page lease sitting on your desk. It’s a daunting task, to say the least—but it’s crucial that you understand the contents. After all, many commercial leases are not based on a standard form, meaning they’re tailored to the landlord’s needs. You’ll want to make sure your lease is not skewed too far in your landlord’s favor. How do you make sure your company’s first commercial lease accommodates your interests as much as possible? Here are some essential questions you should ask.
- Does it let specify who else can move in?
Depending on the needs of your business, you may want to have some say in the decision of who else can rent in your landlord’s building. Your business can clash with others in unexpected ways. For example, if you hope to attract people to your bakery with the smell of fresh bread, you might find your efforts impeded by a nearby tobacco shop. Alternatively, your landlord could decide to rent a nearby space to a competing business. An attorney can negotiate limitations through exclusivity clauses to help avoid these types of scenarios.
- How long does the lease run (and can you renew it)?
Compared to residential leases, commercial leases can run for a long time—anywhere between 3 and 10 years, in general. You can usually negotiate the term with your landlord, but be clear on specifics like the move-in date. Your lease should include a clause that outlines what will happen if the space isn’t ready on time. Landlords sometimes add in their own clause allowing them to provide you with an alternative space if the intended space isn’t ready, which can only complicate the moving process.
- Can you sublease?
Since commercial leases are legally binding long-term commitments, you may want to prepare for any eventuality. If you later decide your business isn’t thriving as much as you expected, or you want to set up shop in a different location, you’ll probably want to sublease your space to a new tenant. Make sure you understand your landlord’s requirements on subleasing, as well as your specific subleasing privileges.
- How much is the rent?
There are many different ways to calculate rent using square footage to compare costs. Be clear on the type of rent you are paying and be diligent while making cost comparisons. For instance, are you responsible for a flat monthly amount (as in a gross lease); must you pay rent, real estate taxes, and insurance (as in triple net leases); or are you required to pay a fixed monthly rate plus a percentage of your gross income (as in percentage leases)? Make sure the format suits your business.
- Are you responsible for building services?
The lease should explain whether you or your landlord must pay for structural maintenance, repairs, or replacements. Things like electricity and HVAC usually fall on the landlord, but you may also want to ask about the cleaning schedule for public areas in your building. Make sure you understand who must pay for services like major roof replacements or foundation repairs. These expenses are often treated differently depending on your area, but make sure your lease offers a fair compromise.
- Do you understand the terminology?
Some landlords prefer to deal with lawyers because they are fluent in the terminology of leases. For instance, most leases mention CAMs, or Common Area Maintenance fees. CAMs allow you to share maintenance costs in common areas—like landscaping, lighting, and security—with other tenants. In these cases, you should have to pay a percentage of the CAM derived from the percentage of the building you are renting. Make sure you’re clear on such details, and generally read through the lease thoroughly to ensure you understand everything.
When in doubt, it’s best to let an experienced attorney take the helm. The professionals at Ser & Associates can walk you through your commercial lease to make sure you are comfortable with its contents, right down to the last clause. Give us a call to discuss your legal business needs. We will go above and beyond to protect your company and your interests.
