A commercial lease dispute could have a serious impact on the profitability of your business. Whether you’re the property owner or manager, or the commercial tenant, it is important to avoid costly disputes by conducting thorough planning and due diligence prior to executing a commercial lease.
A commercial lease is typically not official until it’s drawn up and signed by both parties. Before signing, it is imperative that the agreement protects your interests and does not omit vital provisions that could leave you vulnerable to a dispute in the future. Omissions commonly occur due to simple oversight and underestimating the importance of certain details. Rushing through the process can also lead to problems later.
Some commercial lease provisions tend to be more contentious than others. Pay special attention to use clauses, including those pertaining to sub-leasing, common areas, the use of certain equipment on the property or competition with nearby tenants. If you are the tenant, consider how your business will grow and expand in the future. The way you use the space today may not be the way you’ll want to use it later. If you’re a property owner, you may want to avoid overly restrictive use clauses to keep your space attractive to a range of tenants.
Common area maintenance expenses, as well as conditional obligations, are also frequent subjects of disputes. Clear estimates and schedules of expenses for common areas can help avoid confusion and disagreements. If any of the lease’s terms are conditional such as rent rates or the start of a rental term, the lease should include contingency plans in case the condition is not met. This is especially important if the condition is not controlled by either party.
These are just a few tips that can help you avoid a commercial lease dispute. As a general rule of thumb, both property owners/managers and tenants must stay organized and attentive while drafting leases, ensuring that all details are in writing before signing. This requires experience, advanced planning and an in-depth understanding of the law.
Source: RE Journals, “Five ways to avoid a commercial lease dispute,” Andrew P. Shelby, April 11, 2018