Generally, a commercial lease is much more complex than any residential lease and the success or failure of a business may depend on the terms of the negotiated lease. If you are considering entering a new lease, here are some key points to consider:
- Read and understand the lease. This is basic. Many times, tenants sign leases without fully reading them, and fully understanding the terms of the lease. This sometimes creates problems.
- Negotiate. Negotiate the rental price. Do not accept the asking price. Make sure the lease price together with all the costs you are assuming, is something you can afford. Many businesses fail because they enter into a lease which is too high. Note any escalation clauses and whether there are limits on management fees and costs.
- Gross Lease. If possible, negotiate a gross lease. A gross lease is a lease where the landlord pays your share of the expenses such as taxes, insurance, maintenance, etc.
- Net, Net, Net Lease. This is a lease in which the tenant pays his pro rata share of the taxes, insurance, maintenance, management, etc. This is the preferable lease for a landlord, but not a preferable lease for a tenant.
- Air Conditioner/heating. If possible, place the responsibility for maintenance and replacement for the air conditioning/ heating on the landlord. The landlord will attempt to place this responsibility on the tenant.
- Length of lease/options. Be sure you have options for renewing the lease (if you wish). Many times options are tied to CPI (consumer price index) and sometimes a small fixed percent.
- Have an Attorney Review. The complexity of commercial leases almost demands that you have it reviewed by an experienced real estate attorney before you commit to anything. The attorney can help you in the negotiating process and, potentially, save you more than any fees paid for the service.
My best to you with your leasing and if you have any questions concerning your lease, please do not hesitate to contact one of the attorneys at DeLoach, Hofstra & Cavonis P.A.
