A commercial lease is an important part of almost every business – whether an office lease, an industrial lease or a retail lease. While different leases may have specifics that are unique to the industry, all have fundamental provisions that are essential to every commercial lease.
Consider how the space is measured. Be sure you know and understand the terms in your lease. “Rentable space” is different than “usable space”. Each area is measured differently and it may be important to you.
Take time to understand the additional charges sometimes called “additional rent”. There are usually charges for insurance, real estate taxes and utilities. In retail leases there are often charges for common area maintenance (CAM). For office leases the additional rent often includes full services. Industrial leases are sometimes net and sometimes not. Be sure you understand what you are leasing and what you are paying for. Landlords want to pass through all of the fair expenses to operate the site, but tenants shouldn’t have to pay for people or equipment working at many locations.
Another area to focus your attention on is the area of maintenance, repair and other expenditures. Generally a tenant should pay operating expenses and the owner should pay for expenses that are “capital expenses”. Make sure that you understand who has responsibilities for repair and maintenance. How are the terms defined? Ask questions about the roof, the HVAC systems, and other areas that are repaired, but will eventually be replaced. Are the responsibilities fair?
Pay close attention to the matter of default. In a lease, default is usually defined. What happens if the tenant defaults? What if the Landlord defaults? Do you get notice of default? Are there grace periods? Does the landlord have the right to terminate the lease and take possession? Does the landlord have the right to accelerate rent? Is there an obligation to proceed in a commercially reasonably fashion? Can the tenant withhold rent if the landlord doesn’t meet its obligations?
This is not a complete list of issues that must be addressed. It is important to take time and review your lease. Welts White and Fontaine have experience with leases. We can help you review your lease and protect your interests.