Property Leases Can Be Complicated, Here is What You Should Know Before Signing a Commercial Lease

Property Leases Can Be Complicated, Here is What You Should Know Before Signing a Commercial Lease

For any new business owner, signing a commercial property lease is a big step. Whether you are planning to open a storefront, move into a new office space, or rent production facilities, you’ll need to reserve a space for your business at some point. This may take several years before you find what you’re looking for.

When you do find the ideal space, signing the property lease contract can be irritating, but it’s a very important document that you need to know about. Be sure to pay attention to the fine print, it’s very important. There are 2 things you need to do before signing a property lease:

Research

Understand the statutes typically included in commercial leases

Research includes:

Vetting the landlord
Finding out who owns the building
Researching zoning laws
Becoming familiar with the area

Also, before signing, make sure to have an idea of:

Payment structure
Personal risk exposure
Transfer structure
Landlord’s holdover rate
Nuisance clauses

In this blog, we’ll tell you what you need to know about commercial property leases.

What are the Elements of a Commercial Property Lease?

A commercial property lease is a contract, so there are certain elements that must be present. At the very least, it should contain information regarding the following:

Rent
Security deposit
Lease duration
Additional costs tenant may incur

Building insurance
Property taxes
Maintenance costs

 

As a business owner, you must also understand the difference between exclusive vs. permitted use. If you’re in a competitive industry, an exclusive use may be beneficial.

Do Your Research!

Before signing a commercial property lease, it’s important that you do your own research, including:

Getting to know the area
Learn more about landlord and building owner
Find out about zoning laws in the area
Find out about nuisance laws

Statutes to Keep in Mind for Commercial Property Lease

When you are reviewing your commercial property lease, it’s important to keep a few things in mind:

Rent structure: figure out how much you will pay per month and how much it will increase each year- this can help you build your budget and determine how feasible it is to stay in business in that location.
Lease terms: if you’re opening your business in an area that is growing, a long-term lease might be appropriate. However, a short-term lease gives you the option to change locations or even close your business if things aren’t working out.

You must ensure that you know what you are responsible for each month. In addition, ask  about the following:

Property taxes
Insurance
Modifications (can you remodel/renovate?)
Parking
Repairs/maintenance
Parking
Utilities
Nuisance laws

Once you’ve established pricing and terms, you’ll want to look at some of the less obvious details, including the following statutes:

Transfer structure
Personal exposure
Holdover rent
Non-disturbance agreement

Everything is Negotiable

While it’s true that these are all things you need to know, chances are, there are lots of aspects of the lease that are negotiable. Work with the landlord and if you need to, hire an attorney, to make sure you get the best deal for your business.

Commercial Property Lease Agreement Terms to Know

There are lots of terms you may encounter in a commercial property lease agreement that you need to be familiar with. Below are a few of those:

Rent amount (aka base rent)
Usable square feet
Rent increases
Security deposit
Length of lease
Improvements
Bottom line
Grant of lease
Commencement date
Extension
Late fee
Taxes
Obligation for repair
Permits
Covenants
Indemnity by tenant
Rent adjustment (aka rent abatement)
Condemnation
Option to purchase

This is not a comprehensive list of terms, but it is a list of some of the most common. By taking the time to become familiar with these, you will be able to get the best deal for your company.

Conclusion

If you have decided that it’s time to sign a commercial property lease agreement, contact Toluca Lake Capital. We can help you understand the ins and outs of property leases to ensure that you’re getting the best deal.

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