commercial lease agreement

4 Things to Watch Out for in a Commercial Lease Agreement

Renting any commercial property is a large financial investment. If you do not understand the terms of the commercial lease agreement fully, you can find yourself unnecessarily exposing yourself to risks, including eviction. What are some of the different things that you should look out for before you sign on the dotted line?

What Is the Lease Term?

It might seem obvious that you need to understand the term of your commercial lease agreement before signing, but it is still something that you should confirm. When does your lease start and end? When will you be able to access the property if you need to perform improvements or renovations beforehand? Will you have an automatic opportunity to renew the lease at the end of the term, and are there any guidelines as to how any rent increases will be handled?

What Will You Be Paying?

Another one of the key factors in your commercial lease agreement will be what you are paying. There are multiple types of commercial leases, and depending on what your lease dictates, it could include:

  • A gross rent lease, where you are paying the same amount every month for rent
  • A percentage rent lease, where you are paying a percentage of gross sales past a specific amount on top of a base rent charge
  • A net lease, where you are responsible for paying a flat fee and other expenses, which may include property taxes or insurance

On top of the actual amount of your rent, it’s also critical to understand other expenses that you may be responsible for, like parking lot maintenance, snow removal, HVAC maintenance, and lawn care.

Can the Lease Be Terminated?

Your commercial lease agreement should also be clear about how termination could occur. For example, does the landlord have the ability to terminate your commercial lease agreement early? Do you have any rights in a situation like that? If your lease ends normally, do you have any obligations to the property? For example, some leases require you to make repairs and leave the property completely cleaned. Get all of these details in writing upfront.

Will You Have Exclusive Use?

The concept of exclusive use is critical, particularly in shopping centers and similar areas owned by the same developer or landlord. An exclusive use clause helps protect you against direct competition in neighboring rental properties. For example, if you are a Mexican restaurant moving into a shopping center, you may ask for an exclusive use clause that prevents another Mexican restaurant from moving into the shopping center.

Contact Mobley & Brown, LLP for Help With Your Commercial Lease

When you are preparing to sign a commercial lease for your business, you need the right legal assistance. Our experienced legal team is looking forward to working with you to meet your needs. Call us now at (410) 385-0398.