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3 important facts to verify when signing a commercial lease

On Behalf of | Oct 27, 2023 | Real Estate Law |

Signing a commercial lease can make a big difference to a company’s future operations. The right location can help it connect with more consumers. There won’t be a mortgage to worry about if the company fails, and moving to bigger or smaller facilities as the company develops will be easier to achieve when selling an existing property won’t be part of a moving process.

It’s important to understand that these contracts differ from standard residential leases. There are three types of details included in commercial leases that prospective tenants may need to review carefully to better ensure that a property adequately meets their needs.

The duration of the lease

Commercial leases typically last quite a bit longer than standard residential leases. Instead of a month-to-month arrangement or at least that lasts just one year, the agreement will persist for anywhere from three to five years, sometimes even more than that. Even if the business fails, a landlord may still try to demand payment for the duration of the lease agreement. Therefore, reviewing and possibly negotiating how long a lease lasts can be very important for commercial tenants.

Secondary fees

Landlords with commercial units may charge common area maintenance (CAM) fees or triple net (NNN) fees for the cost of maintaining the property and providing certain services. They might also collect a portion of the utility costs for the facility from individual tenants. Reviewing and clarifying fees secondary to the actual rental cost each month will be crucial for those negotiating the terms of a commercial lease.

Maintenance responsibilities

Many commercial landlords pass a portion of maintenance responsibility to the tenants, especially if they don’t impose any maintenance fees. Such terms are often deep in the contract and so different from residential leases that first-time entrepreneurs completely overlook them. Then, when there is some kind of major issue with the property, they face not only a landlord unwilling to repair those issues but also personal financial responsibility for resolving them.

Executives and entrepreneurs who understand the unique terms often integrated into commercial leases will be in a better position to set their companies up for success when signing a long-term agreement that will impact how their company operates for years to come.