If you are a commercial landlord, leasing property is your business. If you are a commercial tenant, you need favorable lease terms to protect your business. Either way, a lease is essential to your business, and you can set your business up for success by understanding how to negotiate commercial leases, dispute commercial lease terms, and end a commercial lease early.
Negotiating Commercial Leases
Commercial leases are different from residential leases. Since you are renting or leasing commercial space, you will not benefit from standard lease forms or consumer protection laws that protect tenants. However, you will have the benefit of tailoring your lease to your unique needs and working with a business lawyer to make sure that the lease furthers your professional goals.
Every clause of a commercial lease should be considered carefully. While the amount of rent to be paid is always a critical component of a business lease, other components are critical for commercial landlords and tenants. Lease terms may also include:
- The term, or length, of the lease
- The amount of any rent increases during the lease term
- Whether a security deposit will be required and if a letter of credit is acceptable
- How the property may be used
- Non-compete clauses that prevent the landlord from renting to a similar business in the same building, complex, or within a specific geographical area
- Who will pay for utilities, insurance, taxes, maintenance, and property repairs
- Who will pay for needed improvements to the property or to remodel the property to make it suitable for the tenant
- Whether the tenant can sublet or assign the lease
- Procedures and penalties for ending the lease term early
Few commercial leases are standard. Instead, there is room for landlords and tenants to negotiate terms that are unique to their needs. Therefore, even if you are working with a commercial real estate broker, an attorney is often necessary to negotiate and review your lease and to set your business up for future success.
Even if you carefully negotiated the lease, a dispute can still arise. The terms that you were so careful about drafting might now be the center of your dispute. Some common causes of commercial lease disputes include:
- How the property is used
- Who should pay for property repairs, taxes, etc.
- Whether the renter can sublet the property
The lease may require you to resolve your dispute through mediation or arbitration. Whether you resolve your disputes through informal negotiation, mediation, arbitration, or litigation, an experienced commercial lease attorney can represent your interests and helping you achieve your business goals.
Early Termination of Leases
Circumstances change. You entered the lease with the best of intentions, but your business needs are different now. As a tenant, you may be moving your business to a more desirable location, closing your business, or looking to decrease your expenses. As a landlord, you may be able to rent your property for more than the current lease allows.
A well-drafted lease will explain:
- Whether a lease can be terminated early
- What needs to be done to terminate the lease
- Any potential penalties for early termination
Yet, disputes over lease termination terms may still occur. An experienced business lawyer can help you draft a lease termination agreement to avoid the expense, stress, and uncertainty of litigation. The lease termination agreement may include:
- A definite move-out date
- An early termination fee or penalty
- A release of claims that the tenant may have against the landlord
- A reaffirmation or renegotiation of any early termination terms included in the lease