A commercial lease can be long and complicated, but it’s essential to review every section carefully before signing. While every part of the lease is important, the following terms require extra attention.
Four Important Parts of a Commercial Lease
1. Length of the Lease
The length of your lease is crucial for your business. A longer lease often comes with lower monthly rent because landlords prefer stability and fewer vacancies. However, if your business needs may change soon, a shorter lease might be better. You don’t want to be stuck paying for unused space or facing hefty fees to break the lease if you need to relocate. If you choose a longer lease, including a sublease clause can help. This way, you can rent out unused space if your business needs change before the lease ends.
2. Rent and Security Deposit Terms
Naturally, the section on rent is one of the most important. Don’t just focus on the monthly rate. Check for any potential rent increases and the maximum allowed amount for these increases. Also, look at additional fees, how much of the operating costs you’ll be responsible for, and any allowances for space improvements.
Pay close attention to the security deposit. Sometimes, you may be able to negotiate and avoid a deposit altogether by providing a letter of credit from a bank.
3. Premises Terms
Many business owners overlook the premises section, but it’s vital. This part details exactly what you’re renting. If you’re only renting part of the building, make sure the lease specifies access to parking and shared spaces like storage rooms, lobbies, or conference areas.
4. Use Terms
The use terms outline restrictions that could impact your business. Make sure there are no limits on the types of operations you can conduct. Sometimes, other tenants may have exclusive clauses that prevent competitors from being in the same building. These restrictions could limit your ability to expand into new business areas in the future. This section will also clarify what kind of signage or advertising is allowed on the premises.
Final Thoughts
Remember, the initial lease draft usually favors the landlord. However, you are not obligated to accept everything as-is. Landlords expect negotiations, so don’t hesitate to request better terms that benefit both parties.
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