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3 terms that can make or break a commercial lease

On Behalf of | Jun 17, 2024 | Business Law |

There are many details that entrepreneurs have to address when they’re starting a new business. They need to choose the business type they want to establish and obtain necessary funding. They may also require commercial space.

Whether someone intends to run a retail shop or start manufacturing products, they need an appropriate space in which to operate the business. A commercial lease is typically a safer option than purchasing commercial real estate.

People don’t know how fast the company may grow or what challenges they may face after starting the business. A lease allows for more flexibility if the company fails or requires vastly different amenities than initially anticipated. Signing a lease as is can be a major mistake for those engaged in developing a new company. What terms might a tenant need to carefully review and negotiate before signing a commercial lease?

The length of the lease

Many businesses fail within the first few years of opening, but the company might be on the hook for Elise well after ceasing operations. Commercial leases tend to last for between two and five years, although they are sometimes even longer than that. Negotiating a shorter term for the lease is often beneficial. Otherwise, tenants may want to request terms that could protect them if the company fails, such as the option of assigning the lease to another tenant.

The total monthly payment

Many commercial leases involve a base rental amount and then additional expenses. Tenants may have to pay for building maintenance and repairs. Landlords who rent out individual units in a larger property may charge common area maintenance (CAM) fees. It is, therefore, crucial for tenants to review a lease carefully and determine what costs in addition to rent they have to cover. It is sometimes possible to negotiate either the rent amount or the fees charged in addition to rent depending on how someone intends to use a commercial space.

Repair and maintenance obligations

Commercial landlords often require that tenants assume some responsibility for facility maintenance. Leases may include terms that make the tenant responsible for repairing any damages that occur during their tenancy. Some companies can absorb those costs and requirements, and others may find it very challenging to do so. Discussing the possibility of maintenance and repairs with a landlord can help ensure that the terms included in the lease don’t put the tenant in a scenario where they may have to cover maintenance expenses for a property they don’t actually own.

Starting a business comes with numerous challenges, potentially including the need to negotiate a commercial lease. Entrepreneurs who seek out the right support put themselves in a better position for their companies to thrive in the future.