A person who’s starting or expanding a business may need to find a commercial space out of which their company can operate. Not all business owners will choose to purchase commercial property. Instead, some opt to lease a preferred location.
One of the most important protections for a business owner and a property owner is having a comprehensive commercial lease in place. There are several concerns that should be addressed in a commercial lease, some of which aren’t relevant to a residential lease scenario.
Duration of occupancy and renewal options
The terms of a commercial lease should include the start and end dates of occupancy. Any available renewal options, such as automatic renewal or written renewal requirements, should be detailed in the lease too.
Security deposit and guarantees
A security deposit will likely be required to move into a commercial space. This should be specified in the lease, along with the terms for the deposit being retained by the landlord or returned to the tenant. Requirements for any personal or corporate guarantee should also be included.
Rent payment terms
The amount of rent, due date for payments and method for payments must be specified. Any other additional costs, such as property taxes, maintenance fees or insurance that the tenant must cover must be listed. Additionally, provisions for rent increases, such as annual adjustments or market rate reviews, should be noted in the lease.
Premises use restrictions
The intended use of the premises and any restrictions for use are stated in the lease. There may be provisions that forbid certain property modifications or subleasing. The landlord can be as specific as they choose in this section, so the tenant must ensure the limitations won’t impede their business operations.
Maintenance and repair responsibilities
Tenants are sometimes responsible for certain maintenance and repair tasks for the property. The lease should specify who’s responsible for what. Typically, tenants are responsible for interior maintenance and landlords are responsible for structural and outdoor tasks.
Termination and default clauses
A commercial lease should include termination and default terms. This includes the terms for early termination, such as how long of a notice is required. Remedies for the landlord, such as tenant eviction for nonpayment of rent or breach of contract, should also be outlined in the lease.
Both parties should ensure they fully understand the terms of a commercial lease prior to signing it. Having a legal representative to review the lease can be beneficial when it comes to ensuring that everything is stated as intended.