Commercial Leasing: Three Critical Terms to Consider during Negotiations

Posted on: 27 April 2018


If you are planning on acquiring commercial space using a lease, you should hire a lawyer to help you examine the contract and negotiate better terms. In general, it is not advisable to approach commercial leasing deals like residential leasing. Remember, there are fewer consumer protection laws for commercial buyers. Also, commercial leases are not standardised like the alternatives. Each landlord will have their own conditions. So, you will need to understand each element of the contract to avoid falling into an unfavourable situation. Here are the most critical terms that you should check in your contract if you are thinking about handling the leasing process without legal help.

Lease Term

You should check the length of the lease before signing the contract. In most cases, commercial property owners and managers will create a long-term lease for their tenants. This option might seem favourable, but you should avoid it because the contract will be difficult to break without consequences. You should negotiate for a short term contract for your small business to avoid being tied down. However, you must ensure that there are renewal options included if you decide to remain in the chosen property.

Rental Amount

You should know the amount of money which will be required for the use of your chosen commercial space. It is important to check the figure provided by your prospective landlord. Then, you should compare the amount with the market price in your local area. You should not accept the set amount blindly before ensuring that it is fair. You should also learn about the escalations or allowable rent increases for your rental property. You should ensure that you understand how these increases will be computed to avoid disagreements.

Additional Costs

You should not sign your commercial lease before determining whether there are additional costs that you will need to handle. Often, small business owners assume that the rental amount will cover all their charges. Unfortunately, the assumption can be highly disadvantageous for the business financial growth because the unexpected charges will increase the rental figure significantly. If your landlord offers a gross lease, your rent will include all additional charges including maintenance, taxes and insurance. If this is your case, you should discuss the specific amount for each additional charge before signing the contract. The alternative is a net lease which will charge separately for these items.

Finally, you should check the required monetary amount designated for security deposit and the outlined conditions for refund. For more information or assistance, contact a local property lawyer.