Leasing a commercial property is a significant commitment, and protecting yourself as a tenant requires careful planning and negotiation. Here are key steps to ensure you safeguard your interests when entering into a commercial lease agreement.
1. Understand the Lease Terms
Before signing a lease, review all terms carefully, including rent, lease duration, renewal options, and termination clauses. Ensure you understand obligations regarding maintenance, repairs, and common area costs. If necessary, seek legal assistance to clarify any ambiguous terms.
2. Negotiate Favorable Lease Terms
Landlords often provide standard lease agreements that favor them. As a tenant, negotiate for terms that protect your interests. This may include requesting rent reductions, rent escalation caps, and flexible lease termination conditions.
3. Conduct Due Diligence on the Property
Research the property’s zoning laws, past tenants, and potential liabilities. Check for any hidden costs, such as maintenance fees, property taxes, or common area charges that may not be explicitly stated in the lease agreement.
4. Clarify Maintenance and Repair Responsibilities
Clearly outline who is responsible for repairs and maintenance. Some leases require tenants to cover certain costs, so ensure these obligations are reasonable and within your budget. Request a provision that limits your responsibility for structural repairs.
5. Ensure a Fair Exit Strategy
A well-structured exit strategy is crucial in case you need to relocate or terminate the lease early. Look for early termination clauses, subleasing options, and lease assignment terms that provide flexibility.
6. Verify Insurance Requirements
Understand the insurance requirements outlined in the lease. Ensure that you have adequate coverage, including liability, property, and business interruption insurance. Confirm whether the landlord carries sufficient coverage for the building itself.
7. Request a Non-Compete Clause
To protect your business, consider requesting a non-compete clause that prevents the landlord from leasing adjacent spaces to direct competitors. This can help maintain your market advantage and customer base.
8. Document the Property’s Condition
Before moving in, conduct a thorough property inspection and document any existing damages. Take photographs and request a written agreement stating that you will not be responsible for pre-existing conditions.
9. Seek Legal Counsel
Engaging a commercial real estate attorney can help identify potential risks and negotiate better lease terms. An attorney can review the lease and ensure compliance with local laws and industry standards.
10. Establish a Strong Landlord-Tenant Relationship
Maintaining open communication with your landlord can be beneficial for resolving disputes and negotiating lease modifications. A positive relationship can also lead to favorable lease extensions and improved lease terms in the future.
Conclusion
Protecting yourself as a commercial tenant involves thorough lease review, negotiation, and legal assistance. By understanding the lease terms, conducting due diligence, and securing fair terms, you can mitigate risks and create a favorable leasing experience.
Contact Hecht Schondorf today for a free consultation.