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Clauses to be aware of in a commercial lease agreement

On Behalf of | Dec 16, 2020 | Business Law, Real Estate |

Finding the right space to operate a new business in North Carolina can be exciting – and overwhelming. Between visiting locations and securing financing, it can be a long and tedious process. As such, when it comes time to sign a lease, many business owners can be eager to sign it and get started on moving in.

However, signing a lease agreement without taking the time to scrutinize it with legal guidance can prove to be disastrous. Certain clauses, including those we mention below, can wind up creating restrictions and financial consequences that work against tenants.

Potentially problematic provisions

Before you sign a commercial lease, pay close attention to the following clauses:

  • Lease types – Depending on the type of lease it is, tenants could be responsible for covering just the cost of rent and utilities, or they could wind up being financially responsible for all property-related expenses, including taxes and maintenance.
  • Renewal options – If the agreement states that the lease will automatically renew at some point, make sure you know when this would happen. If you don’t plan ahead, you could wind up trapped in a lease for longer than you want.
  • Grounds for termination – An agreement should include the reasons why a tenant or landlord may terminate the lease. If the termination process is too restrictive or costly, it can put tenants at a serious disadvantage.
  • Operational restrictions – Some landlords put numerous restrictions on tenant activity. Possible red flags could include penalties for not operating continuously, restrictions on who can be on the premises and rules for using the space. These restrictions could adversely affect your business or your clientele.

Take your time to sign

Considering the impact that lease provisions can have on a business, potential tenants must understand what they are signing on for. Rushing to sign because you need space or there is a lot of competition can be an expensive mistake.

To avoid putting your business and yourself at risk of legal complications and disputes with a landlord, take the time to examine the agreement and negotiate any problematic clauses.