The commercial lease will be one of the most important parts of starting a business. Your rent is going to be a major expense, and the lease details the terms of this payment. However, there is more to a lease than just that, so how can you ensure you understand what you are agreeing to? This short series of frequently asked questions will help you tackle your lease.
- Question: What will the lease detail?
Every lease should identify who the tenant and landlord are, establish how long the lease will be in effect, and what terms the tenant must follow to legally occupy the space. A legal agreement will also be included stating the landlord is allowing the tenant to rent the space. This is the starting point for all leases, but many agreements include many more provisions regarding property alterations, possible situations, amenities, other fees, or termination of the lease.
- Question: Can the lease be negotiated?
Yes. In fact, your lease should be negotiated. Some landlords have a “standard” lease, which makes it sound like it should work for every tenant. In reality, however, every tenant should gain an intimate understanding of the lease, identify what they would like to be added, and negotiate with the landlord for these provisions. At the time you receive the lease, it will likely favor the landlord, but there is nothing wrong with creating provisions to favor the tenant. Most landlords will agree to reasonable provisions. A healthy relationship between landlord and tenant should allow both parties to work together to get what they need.
- Question: Must the lease be signed at the time of receiving it?
No. You should take the lease and review it on your own. It is recommended that you let an attorney review the lease as well. This may not be necessary if you have experience with leases, but more likely, having someone to explain what each clause and provision means in an understandable language will greatly benefit you. An attorney will also help you make negotiations and can even negotiate on your behalf. Additionally, explaining to your attorney what additional provisions you would like to add to the lease can allow them to ensure your needs are met.
- Question: How can the tenant know if anything important is missing from the lease?
Simply put, you cannot. It is an attorney’s job to know everything that each lease should include, so you can rely on them to tell you. It is possible that you have enough knowledge of lease agreements that you can tell if anything is missing, but for you to be confident, you will practically have to be an attorney yourself. It may be simple enough to recognize an unfair provision that is included, but recognizing a fundamental or instrumental clause that is not in the lease is much more difficult.
- Question: Can the lease be changed after it is signed?
As a contract, the lease cannot be changed after being signed, but the terms of the agreement can change. All the possible changes will be detailed in the lease itself. It should account for every possible circumstance, including financial trouble for either party, damages or destruction of property due to natural causes, what happens when the term is up, and more. These restrictions apply to the landlord as well as the tenant. As a renter, you have the assurance that your landlord cannot unexpectedly raise your rent. Every lease should include an escalation clause, which details what circumstances allow rent to be raised.
- Question: What other fees is the tenant responsible for paying?
Again, you must confirm that all these details are included in the lease. Typically, the fees each party is responsible for is determined by the type of lease. There are three major categories of leases: gross lease, net lease, and modified gross lease. Each splits up the responsibilities for property tax, maintenance fees, janitorial expenses, and utility bills in different ways.
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