Commercial leases can help business leaders lock in rental prices and secure facilities and ideal locations for their intended business functions. Unfortunately, rushing through the lease negotiation and signing process can lead to unfavorable terms that diminish the benefits derived from a lease agreement.
Reviewing lease terms with a legal professional before signing is beneficial. Prospective tenants may need to prioritize the review of the three types of terms below at that time:
1. Maintenance responsibility and costs
In a triple net lease, tenants may have an obligation to cover all taxes and insurance costs, in addition to rent, utilities and maintenance expenses. Common area maintenance (CAM) fees are another way for landlords to pass operating expenses to their tenants, and they can be unpredictable from month to month in some cases.
2. Early termination rules
Some landlords agree to include force majeure clauses that allow them or tenants to cancel the lease in scenarios where uncontrollable outside factors interfere with business operations. Other landlords may include provisions, such as lease assignment clauses that prohibit their tenants from arranging for an outside party to assume the lease if they need to leave the space before the lease ends.
3. Restrictions on use
Landlords frequently include use clauses in their leases that limit their tenants to a specific business function. Tenants may not realize that any change in business function could theoretically violate their lease.
Commercial leases are so large and dense that even business leaders familiar with contracts may need help reviewing them. Working with a business law attorney can reduce the risk inherent in reviewing and signing a long-term commercial lease accordingly.