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Commercial lease basics for your business

Running a business can be exciting and a little intimidating. One of the most important elements of your business is its location. For some, it can take more than a single try to get it right, and often that means negotiating a commercial lease with a property owner rather than purchasing property. Not every business owner fully understands that negotiating the terms of a commercial lease can be much more complex than renting residential space. Working out the right deal for you business space will likely be one of the most important business deals you make, and getting the details right can sometimes make or break the overall success of your business. Here are some things to remember before embarking on the journey for your business's perfect location.

Not like renting a house or apartment

Residential leases tend to be very standardized; if you've rented one apartment or house, you probably have a good understanding of how it works because there is very little deviation from the standard form. Not so with commercial property. The leases tend to be longer, and can be up to 5-10 years, rents are much higher, as are security deposits, and there is a lot more negotiation necessary when it comes to making modifications to the property as your business needs change, how rent adjustments work, who pays for maintenance and limits on leasing other property in the building to competitors.

The good news is that as a business owner you have more power to negotiate what you want and need in order to give you the best chance of success in your business. The bad news is that once the negotiations are made, they are much harder to break. Having a business lawyer look over the terms with you can help you spot any sticking points that might not be in your best interests. It's important to make sure the lease and location will continue to serve the needs of your business at a price you can afford.

Critical things to watch for

Once you sign a commercial lease, you've made the commitment, so it is important that it is one you can work with. You will need to know

  • Is the lease a gross lease or net lease -- a gross lease includes insurance, property taxes and maintenance, a net lease will add those things on separately.
  • What spaces are included in the rent-- include common halls and elevators
  • How modifications to the space will be handled -- who pays for them, and whether increased value effects future rental terms
  • Who is responsible for Americas with Disabilities Act (ADA) required modifications for public businesses or those who employ 15 people or more? These may include widening doorways, installing ramps or other adjustments.
  • Who is responsible for general maintenance and repairs
  • What types of signage is permitted?
  • Is adjacent space available if you expand?
  • What type of notice is required to break your lease, what penalties might you expect if you do?

With a commercial lease there is a lot at stake, including money, your livelihood and even your dreams. A poorly negotiated lease can break a business. Before getting into a new contract, be sure to get the legal and financial advice you need to make the right negotiations. Contact Bernstein & Feldman, P.A. at 410-216-4006 to speak to an attorney about your business and leasing needs.

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