Starting a new business is an exciting process. It requires that an entrepreneur handle a variety of practical challenges. They must hire workers and acquire materials or equipment. They likely also need to establish a commercial facility somewhere.
Whether an entrepreneur intends to run a nail salon or a local retail shop, they need a space in which to conduct their business. Leasing a property is a more flexible and cost-effective solution than immediately trying to buy a business facility when starting a company. Leases involve less long-term commitment and extend the opportunity to expand or move to a new location.
However, leases are binding contracts that can potentially impose major costs on the business or the entrepreneur. There are certain terms that are particularly important to review and negotiate before signing a lease. The three terms below can have a direct impact on the financial stability and success of an organization.
The duration of the lease
Traditional residential leases either offer month-to-month accommodations for tenants or year-long rental agreements that they can later renew. Commercial leases tend to last for far longer. It is standard for a commercial lease to require a commitment of between three and five years. Particularly for a first-time business owner, a long commitment can be a major risk. Seeking a shorter term can be necessary for the protection of an entrepreneur.
The allocation of maintenance responsibilities
Residential leases typically make landlords responsible for all major maintenance costs. That is not necessarily the case in a commercial lease scenario. The commercial landlord may maintain the premises, but they might assess substantial fees in addition to rent for doing so. Other times, they may include terms in the lease that make the tenant responsible for any significant repairs or maintenance. Tenants need to review those terms and negotiate based on their capabilities.
Restrictions on business operations
Landlords renting out one unit in a large facility may limit the number of parking spaces available to a business tenant. They may also have rules requiring that the business only operate in one particular industry. Limits on how a tenant uses the space can lead to an eviction or the imposition of major fees for any alleged violations. Tenants need to make sure that their intended use of the space does not potentially put them at risk of eviction or increased costs related to landlord fees.
Negotiating custom terms in a commercial lease can help mitigate some of the risks that come from renting business space. Entrepreneurs may need help reviewing a lease and communicating with a landlord to establish favorable terms. Seeking personalized legal guidance is a great way to get started.