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7 Critical Lease Terms that Corporate Tenants Should Know

Posted by Don Catalano on Nov 6, 2017 5:03:00 AM


Renting commercial space is a huge responsibility, as the success or failure of a business rides on the particular terms of the lease a corporate tenant agrees to. Before approaching a property-owner, it’s best that you first understand how commercial leases work and before signing your lease agreement, be sure that you agree with all terms of the lease. Here are the most critical lease terms that every corporate tenant should pay attention to:

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Topics: Commercial Lease Terms

4 Lease Terms that Can Have Real Impact on Business Success

Posted by Don Catalano on Apr 17, 2014 9:46:00 AM


A few words here and there can have a big impact on how your lease impacts your business. Paying close attention to these four lease terms and the way that they are drafted can help you keep your good spaces and get out of your bad ones before they start to harm your bottom line and your success.

 

Renewal Options

In a space that works well for your business, you could argue that the most important lease terms are those that define your renewal options. Having the ability to renew your space without having to compete or renegotiate gives you some of the stability of ownership with all of the flexibility of leasing. The best renewal options have fixed rent increases. If you have already negotiated that your rent will go up 5 , 10 or 15 percent when you take a new option, you end up with two choices.

  1. If the market rent is higher, you take the option and enjoy lower-than-market rent for the entire option period.

  2. If the market rent is lower, you let your landlord know that you'd be willing to stay but that you will only re-up at 95 percent of market. He'll thank you since you saved him from having vacancy and having to pay commissions and tenant improvements for a new tenant.

Either way, you win.

 

Subletting and Assignment

When things don't work out, it's important to have a way to get out of your lease. Generally, buyout clauses won't be that generous since the landlord will want to be able to count on the income that you originally promised. As such, the more important lease terms are those that deal with assignment and subletting. The more rights that you can get to to turn your space over to someone else, the better.

Although a lease that grants an unlimited right to assign your responsibilities and completely get off the hood is going to be hard to negotiate, getting the right to sublease your space with little interference from the landlord is important. If possible, try to get the right to keep your options if you vacate. That way, you can offer long-term subleases and potentially attract more tenants including those that would be shopping for your space if it came available as direct lease space.

 

Rules and Breaches

Pay careful attention to all of the lease terms that define the building's rules and its requirements. These terms can determine whether or not a competitor can come in next door to you, what types of businesses can share the building (does your accounting firm want to be next to a dental practice?), and how parking gets divvied up. While some building rules might limit your options, they also help to keep your co-tenants in check.

Along with the rules, read the lease terms that define landlord breaches carefully. Having the ability to withhold rent can be a valuable option if the landlord isn't enforcing the rules. On the other hand, the right to cancel your lease in the event of a landlord breach might not be as valuable since he might want you out of the building to accommodate a different tenant.

 

Signage Rights

While the building's overall rules impact your tenancy, its signage impacts your brand. For better or for worse, the names on your building affect your employees', vendors' and clients' impression of you. Getting signage rights of your own is great but, barring that, confirming that the management can't just slap any name on the building, can turn out to be just about as valuable. 

 

View some other Commercial Lease Term articles:

5 Office Lease Terms to Watch For

Lease Terms That Give You Options

7 Lease Terms that Can Protect You from a Troublesome Landlord

 

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Topics: Commercial Lease Terms

Why a Tenant Liability Policy is Crucial to Protecting Your Company

Posted by Michael Sweeney on Dec 11, 2013 10:55:00 AM

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Topics: Commercial Lease Terms

3 Lease Clauses to Avoid as a Corporate Real Estate Office Tenant

Posted by Michael Sweeney on Sep 3, 2013 9:29:00 AM

Negotiating a commercial office lease is a challenging and time-consuming responsibility. When lease terms look familiar, many tenants take a cursory look at the clauses and sentences. In an attempt to maximize total rent, you should expect the landlord to add language or provisions that serves to meet this objective.

Therefore, it's critical for you to take the time to carefully read the lease terms and understand every word before signing the document to ensure you're not jeopardizing your best interest. Here are three lease terms you want to avoid or add remedies to counteract them and protect your investment.

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Topics: Commercial Lease Terms