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5 questions to ask about any commercial lease

On Behalf of | Aug 30, 2019 | Landlord's Guide |

Your business is doing well and you’re looking to move into a new commercial space. You do your homework, find a spot that seems like it fits your needs, then meet with the landlord to talk about a possible arrangement.

That’s when you get the lease, a thick stack of papers that looks like the manuscript for an epic novel. Within all these pages are the terms your financial future may be tied to. It’s not something you want to skim – a poor decision now could set you back for awhile. With that in mind, here are five questions to ask when considering any commercial lease.

Repairs and maintenance: Who pays for what?

You will want a lease to be as clear as possible about which party is responsible for repair and maintenance needs when they pop up. There is you, the tenant, as well as the landlord. There may also be a property management company to take into account. Understanding who is responsible for what can help you avoid nasty surprises and arguments down the line.

Is there an option to sublet?

Subletting can be a good way to get out of a lease agreement if you need to. It’s not always possible, however. Lease agreements can specifically dictate whether a tenant can look to sublet the space, as well as the process for bringing in a subtenant.

Is there a narrow list of permitted uses?

Some leases will contain provisions about permitted use, allowing a tenant to conduct only certain activities on the premises. Maybe you repair electronics, so the lone permitted use in the lease is “Repairing of electronics.” That means, down the line, if you want to expand your business and add services – say you want to start selling smartphones – you may not be able to under the terms of the lease.

What happens if the landlord sells the property?

Say you enter into a seven-year commercial lease agreement, only for the landlord to sell the property to a new owner two years in. What happens to the lease? Oftentimes, nothing. Your lease terms remain the same – unless there is a clause in the lease regarding a sale of the property. In that case, you may be bound by those terms no matter how inconvenient.

How will the rent change?

Commercial leases can stretch on for years. Because of this, it’s not uncommon to include ways for the landlord to increase rent. You should make sure you understand not only how much rent could increase, but the reasons for a rent hike as well as when these changes can occur. A lease that allows a property owner to alter rent on a whim can become problematic for a tenant.

Commercial leases represent a significant commitment, both in terms of your time and your money. Yet they can be complicated documents, with page after page of dense language and references. That’s why it is often smart to have a law firm, such as O’Brien Legal, read over the terms. They can do due diligence to help ensure you’re getting a fair deal.