Real Estate

What to Look for in a Commercial Real Estate Lease

Trying to understand commercial property lease terms can seem like navigating a minefield – there’s a lot of new terminology and industry jargon to understand. When it comes to negotiating, some landlords may try to pass a lease document as a “standard lease” that all tenants must sign. In many cases, unknowing tenants could end up agreeing to terms that are less favorable, which are in fact not a standard policy. Be careful with the following clauses:

  • Anticipated termination – this clause often allows landlords to terminate the lease early and the reasons for early termination may or may not be given. Resist including such clauses in your negotiations.
  • Default – be wary of onerous clauses that allow the landlord to evict a tenant if the rent has not been paid within a week of the due date. While it may seem standard, it is more typical for leases to stipulate that tenants be notified in writing at least 14 days before consequences are enacted. Negotiate the required written notice in the event of non-compliance.
  • Redevelopment – Try to avoid remodeling clauses that allow the owner to terminate the lease to remodel or renovate the premises.
  • Indemnity – be aware of the compensation clauses that indemnify the lessor against claims for accidental loss or damage by the lessor. Be sure to check your insurance policy to see if an indemnity clause on your business property could violate your policy.
  • Transfer dates – The delivery date is the date on which the premises are handed over to the tenant to start the conditioning installation, before the fixed start date of the lease. Avoid leasing contracts that allow the owner to alter the delivery date without compensation, as you could incur substantial costs if you are late or unprepared for construction of the equipment.
  • Do good – a repair clause generally requires the tenant to leave the premises in good condition upon departure. This generally includes the removal of any equipment that has been installed by the tenant during the period. If your facilities are installed with equipment, negotiate to modify the “repair” clause to a general expectation to leave the facilities in good condition and repairs.

There are many other clauses and terms that can be negotiated, who is responsible for legal fees, as well as maintenance, repair and maintenance costs. Many companies will find that they are much more successful negotiating the terms of the lease to help reduce their costs rather than trying to get the landlord to lower the price. TO tenant broker service can help with the “legal jargon” of leasing; they will help you better understand what your options are.

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