Business owners and those starting a professional practice may decide to rent commercial space. A dentist finally branching out on their own after finishing their degree could benefit from renting a space initially while developing their practice.
Buying real property can be quite difficult, but renting is often more accessible for new businesses and growing companies. Tenants have more flexibility to adjust their accommodations as their business shifts.
As executory contracts, leases impose obligations on both parties. Tenants looking at the terms of a commercial lease may not evaluate it as carefully as they should and may accept uneven or unfair terms. The following are some of the warning signs that a lease might include dangerous terms.
Variable maintenance fees
A dentist or other professional renting one unit in a large office complex typically has to cover common area maintenance (CAM) fees. In some cases, established landlords collect a set amount in CAM fees. Other times, they express the fees as a percentage of overall maintenance and repair costs.
The latter arrangement can be problematic for tenants. If the landlord decides to replace the roof or resurface the parking lot, the monthly CAM fees may increase significantly and put pressure on the company’s budget. Landlords often pass any costs to tenants without consideration of how those expenses might affect operating budgets.
Long-lasting leases
Another key consideration before signing a lease is how long it makes the tenant responsible for rent payments. Commercial leases are more likely than residential leases to last for multiple years. In some cases, they might extend beyond five years.
Commercial landlords can often hold business tenants accountable for the duration of a lease even if the company goes out of business or moves to another location. The longer the lease lasts, the greater the financial hurdles the business may face if the company doesn’t thrive at that location.
There are many other details that are easy to overlook in a lease that can put a tenant at a disadvantage. Reviewing a commercial lease with a real estate lawyer before signing it is often the best option available for a business owner or executive. Those who negotiate lease terms can avoid unfavorable contract inclusions and protect their businesses from future hardship.
