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What do you need to know about signing a commercial lease?

| Aug 24, 2020 | Transactional Services |

Anytime you sign a contract, having it carefully reviewed for the legality and questionable inclusions is usually a good decision. Commercial leases are very expensive potential contracts that deserve the same degree of scrutiny as other contracts a business might execute receive.

Commercial lease agreements can be one of the more substantial ongoing financial obligations that your company has to pay. Before you sign, there are certain things that you need to closely review and possibly negotiate.

Leases can sometimes last longer than businesses do

Residential leases often have a duration of 12 months or go from month to month, but commercial leases frequently last for much longer. Your lease might last for two, three or even five years.

Unfortunately, quite a few businesses will fail in their first few years of operation, which might mean that you are on the hook for the full amount of rent due for the remainder of your lease even after the company goes under. Negotiating a shorter term or including clauses that forgive your additional rent once a new tenant moves in is a way to protect yourself from this risk.

The nature of your business should influence your costs

Many commercial rental properties share facilities with other units owned by the same company. You will likely share common areas like a foyer, a parking lot or even bathrooms with other businesses.

Depending on the nature of your business, the frequency that customers are clients and visit and the number of staff members you have, your demand for those facilities may be substantially lower than the demand by other tenants in the building. Carefully negotiating the common area maintenance (CAM) fees can help reduce how much you pay.

You may be responsible for maintenance and repairs

If you rent an entire building as a commercial tenant, the landlord may pass everything from lawn care to furnace maintenance on to you as the tenant. Determining what is your responsibility and the potential liability it could cause your company now before you sign the lease is an important consideration.

Anyone hoping to sign a commercial lease or make other major business contracts in the near future will likely benefit from working with an attorney during that process.