When it comes to starting a new business or expanding an existing one, signing a commercial lease is often a major step. A commercial lease is a legally binding agreement between a landlord and a business tenant, outlining the terms and conditions of renting a commercial space. However, before you sign your business’s name (and most likely yours too) on the dotted line, it’s crucial to review the lease carefully and know what to look for to prevent big problems for you and your business down the road.
Commercial leases are nothing like residential leases because you only have the rights that are laid out in the lease (the ones you negotiate). That means the future of your business has a lot to do with what’s written in your commercial lease. But you’ve got a lot more control than you think when you take action from the very beginning. Here are 5 red flags to look out for BEFORE signing your commercial lease.
Commercial leases are nothing like residential leases because you only have the rights that are laid out in the lease (the ones you negotiate). That means the future of your business has a lot to do with what’s written in your commercial lease. But you’ve got a lot more control than you think when you take action from the very beginning. Here are 5 red flags to look out for BEFORE signing your commercial lease.
1. Maintenance and Repairs- When it comes to repairs, the HVAC system, electrical, and plumbing systems are major components that come with a hefty price tag. HVAC system repairs can range from $5,000 to $15,000 or more. It’s essential to have a good understanding of what your Commercial Landlord will cover and what you’ll be responsible for maintaining. Keep in mind that everything is negotiable, including the terms of your commercial lease. Your lease should clearly outline your responsibilities, which should be reasonable and manageable for your business. Consider limiting the amount of financial responsibility your business has for making repairs to the major components of the space. But whatever you do, don’t let these huge repair bills catch you and your business’s revenue off guard!
2. Additional monthly charges – When it comes to commercial leases, it’s not just about paying the rent – there are usually a bunch of extra costs that sneak their way in. You need to know what these additional financial obligations entail, how they are tallied up, and how to avoid being taken for a ride.
3. Hidden fees and interest – Landlords often use commercial lease language to generate additional revenue beyond just renting you the space. Look out for processing fees for various requests, late fees and super high interest and penalties and when in doubt NEGOTIATE, NEGOTIATE, NEGOTIATE (or let us do it for you).
4. Waiver of rights – It’s no secret that commercial leases tend to be Landlord friendly, but many Commercial Landlords use language in the lease to get unsuspecting business owners like you to give up legal rights that are designed to protect you. You should never give up certain rights in a commercial lease because if something ever goes wrong (and something always does), you’ll need them.
5. Non-exclusivity – If you’re in a highly competitive industry, one of the best things you can do for your business is make sure an exclusivity clause is included in your commercial lease. An exclusivity clause will prevent the Landlord from being able to rent out additional space in the building to potential competitors or businesses whose presence could cut down on foot traffic to your business. This clause would prohibit your landlord from renting out space to businesses that could potentially compete with yours or reduce the number of customers visiting your store. Having such a clause in place can give your small business a competitive edge and boost foot traffic to your business.
Don’t put your business in a $ticky $ituation by failing to proactively review and adjust your commercial lease to fit your business before signing. There’s really no such thing as a bad commercial lease, but there are commercial leases that are bad for your business.
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