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Key clauses to consider with commercial leases and lease negotiations

On Behalf of | Jul 1, 2022 | Business Consulting & Advice |

Signing a commercial lease is a big step for any business, whether it is new or expanding. It’s crucial to take your time and review the lease carefully, so you understand what your obligations are – as well as the property owner’s duties to you.

Some business owners may not realize that many of the terms in commercial leases are negotiable. That’s why it’s wise to think of the lease agreement presented to you as a starting point, not a done deal.

Key provisions in commercial lease agreements

Let’s look at some of the key clauses contained in most of these agreements and what they will mean for your business.

  • Use: This provision of the lease outlines how the space can be used. It can include items like what hours you can or must be open for business, what type of businesses are prohibited and much more. Also, if you make changes to the way you do business or to your product or service offerings, will your lease allow them?
  • Rent escalation: This clause determines how often and how much the property owner can raise your rent.
  • Improvements and alterations: This may be one combined clause or two separate clauses. Improvements will need to be completed before you can use the space for your business. The clause should state whether you or the owner pays for them. Alterations refer to changes you’re allowed to make after you’ve taken possession and whether you need to get the owner’s permission first.
  • Sublease: This states whether you’re allowed to lease all or part of your space out to someone else.

It’s important to think ahead as you review the clauses. For example, you may have no intention of subleasing. However, what happens if you find a space far more suitable before your lease is up? A sublease could prevent you from losing money.

It’s always wise to have experienced legal guidance when reviewing and negotiating a commercial lease. We help new businesses ensure that their lease agreement meets their needs and their budget. Contact us for a consultation to learn more.