Commercial leasing differs in significant ways from residential leasing. Many consumer protection laws apply only to residential leases. There are no standard forms for commercial leases; each commercial lease is drawn up according to the landlord’s needs and wants. Additionally, it is very difficult to break or change a commercial lease. When discussing a commercial lease, there is usually much more room for flexibility and negotiation, since businesses often have special needs or requirements.
How can commercial tenants protect themselves and their interests in a commercial lease?
The lease should fit your business’ needs
Since the needs of your business may change, the terms of the lease should state as broadly as possible what the property can be used for. A statement which allows “any lawful use” of the property is ideal, but the landlord may have certain restrictions that must be included. Don’t rely on oral agreements; be sure everything is clearly defined in the lease.
The lease should also clearly state who is responsible for maintenance and repairs of the property. The landlord may agree to do minor repairs and routine maintenance, while you may assume the responsibility for major repairs, maintenance that is not considered routine or frequent, remodeling, and renovation.
Depending on the business and landlord, it could be in your best interests if an exclusivity clause is included in the lease. For example, if your business is retail and the landlord is a large shopping center, a clause could be included that limits the number of other businesses in that same facility that would be in direct competition with your business.
Terms and extension of the lease
The lease should extend for a reasonable amount of time (2-5 years is normal), and an option to extend the lease should be included. If the lease is extended, the original terms should be retained unless both parties agree to make changes. Terms of the extension should be clearly defined, including any increase in rent. It should be clearly stated whether an extension is automatic or if notice is required by either the business or landlord.
Clearly, navigating the waters of a commercial lease can be difficult. Every lease is different, and a landlord’s lease, before negotiations begin, is written to protect his/her interests, not yours. You need to look out for the interests of your business. An attorney experienced in these matters is essential. At Dwight W. Clark LLC, we can help you negotiate the terms that will be in the best interests of you and your business.