Commercial leases are incredibly important to understand.
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Commercial leases need to have certain requirements, such as the parties, the property being leased, the cost, and the term of the lease.
Other than that, leases can vary greatly.
Some leases are very simple, with few terms and a general understanding of what is required of the parties. Other leases can be lengthy, complex documents.
Both can have advantages and disadvantages.
When you’re reviewing a commercial lease, make sure to review with an attorney. Commercial leases often contain a variety of terms with legal implications or unseen potential consequences.
Some terms to look out for include:
The rental amount. The rental amount should be simple and straight-forward, but can often include hidden fees, percentages of revenue, built-in increases and interest payments, and property expenses. Certain expenses may seem small, but you want to make sure to see past costs and find out if these are expected to increase. It can also be wise to build in a cap on expenses.
Term and Options. How long is the term? Does it automatically renew? Sometimes, a long term can be beneficial, but other times it can lock you into a lease that may become unfavorable. For example, many businesses were locked into leases after switching their workforce to remote work during the COVID-19 pandemic. It is also important to think of options, such as options to renew. Are the renewal terms specified in the lease? If so, make sure they are livable.
Relocation. Can your landlord force you to move to another suite in the building? Some leases allow for relocation within a certain building. Would this be acceptable to you? On what terms? If this is something the landlord wants to include, make sure to include specifications about any space you would be relocated to, along with any requirements you have for moving costs, notice, etc.
Dispute Resolution. Some commercial leases include dispute resolution provisions. These can prescribe certain venues for litigation, alternate methods for handling issues, or even alternative dispute resolution. Alternative dispute resolution clauses can prevent you from filing suit and can be very costly. Also look for any clauses involving paying costs, expenses, and/or attorneys’ fees. This can be cost prohibitive, if they are requiring you to pay costs.
It is essential you review the entire lease with an attorney and make sure that you are comfortable with all terms. If the lease leaves out terms that you have agreed to, make sure they are added into the lease.
If you need help with a commercial lease, contact Rickard & Associates today!
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