May 13, 2019

How to Protect Yourself From These 6 Commercial Lease Issues

By Don Catalano

Connect

How to Protect Yourself From 6 Commercial Lease Issues
Commercial leases are highly complex documents filled with terminology that may be largely unfamiliar to you. Still, it's vital that you take the time to read the entire contract and ensure that you understand what you're signing. In addition, you'll want to ensure that there is language in the lease that protects you and your company from common issues that can arise. Here are some potential problems and what you can do to protect yourself from them:

 

1. Issues With Build-Out of Premises 

Many lease agreements provide for offices to be built out to suit tenants' needs. While this can be a pro for your company, make sure that the clause provides a specific deadline for the completion of the project and time for punch list work. Otherwise, you could find your move-in day delayed.

 

2. Unfair Expenses

If your commercial lease allows for the pass through of building expenses to you in the form of fees or Common Area Maintenance, there needs to be language that excludes unfair costs from calculations. Specifically, you should be absolved from paying for capital improvements that the landlord chooses to take on. The lease should also give you the right to request an audit to ensure transparency.

 

3. Lack of Essential Services 

In the event that your landlord does not provide essential services that are promised in the lease, you need to have the right for recourse. This could come in the form of a rent abatement for the period during which services are unavailable or even the right to cancel in the case of an extended or ongoing failure to deliver.

 

4. Notice of Default 

You may feel confident that your company will have no problems paying your rent, but today's economy is unpredictable and unforeseen events can arise. It's important that your lease protects your company in the event of a default. Make sure that the lease requires the landlord to notify you if you enter into default and that you are given an opportunity to repay what you owe before you are evicted.

 

5. Assignment and Subletting 

Subletting allows you to rent a portion or all of your office to a third-party while you continue to hold the lease, while assignment lets you turn over your lease to another tenant and walk away. Landlords may be opposed to providing the right to assignment or subletting in the lease. If you are unable to negotiate these terms, fight to at least have exceptions made in the event that you sell your business or wish to have a subsidiary or other related party move into your space.

 

6. Relocations

Relocation clauses give the landlord the right to move your company to another property or space. These clauses are very unfavorable to tenants, so if possible, you should try to negotiate their removal. In the event that the landlord will not agree to removal, have language added that stipulates relocation must be to a space and location that is comparable to your leased space. Additionally, the lease should specify that the landlord must cover all moving expenses.

 

Here are a few other articles we know you'll enjoy:

Corporate Real Estate Tour Checklist

Myths to Know About Commercial Real Estate

10 Modern Features to Look For When Leasing Office Space

 

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Topics: Commercial Lease

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Don Catalano

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