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Considering the lessee’s business when drafting a lease

On Behalf of | Jul 7, 2023 | Commercial Real Estate

Commercial lessors can use a standard lease agreement for all their tenants. But since each lessee has specific needs based on their business type, the practice of using a standard lease agreement is not advisable. Here are some reasons you should consider your lessee’s business when drafting a lease.

Knowing how they will utilize the space

Will the tenant use the area as an office, retail or industrial space? Will they be selling food or clothes? The reason why a lessor should know these things is so that they can create a tailor-fit lease agreement for their tenant. For example, a tenant who will use the space as a restaurant may need authorization to modify the kitchen area to meet state rules and regulations. A retail business may require less modifications.

A clear and solid agreement

Understanding the tenant’s business can help the lessor smoothly draft a lease agreement outlining the roles and responsibilities of both parties according to the circumstances. The more specific the provisions are, the less chance of ambiguous interpretation that can lead to a dispute. And having a clear idea of the tenant’s business will help create a clear and solid lease.

Protection to both parties

It is important for commercial lessors to carefully draft their lease agreements to ensure they protect their rights. If the lessor specifies what modifications are not permitted in the lease space, they can protect themselves from potential losses. But keep in mind that the lease agreement should also be equally protective of the lessee’s rights to avoid lawsuit risks in the future.

Drafting a commercial lease agreement can be overwhelming, especially with legal terms unfamiliar to a non-attorney individual. Fortunately, online resources are available for lessors and lessees. Legal experts are also available to draft and review contracts if you are having difficulty executing them yourself.