A major decision most business-people face is choosing to buy or lease their business space. For those who choose to lease, the leasing process can be tricky. Commercial leases tend to be long, complicated and offer less protection than residential leases.
Listed below are some initial questions that our real estate lawyers encourage you to consider when negotiating a commercial lease:
- Are all important terms included in an offer to lease? It is difficult for either party to refuse a term if it is in the offer to lease.
- What costs and expenses related to the property are you as the tenant responsible for? Are those costs and expenses shared by all the tenants of the building proportionately? Often a landlord will try to pass on all costs and expenses to the tenants; however, there are certain items that the landlord should be solely responsible for.
- Is the landlord responsible for its gross negligence and willful misconduct? Often landlords will try to remove itself from all liability, even in cases that the landlord has been negligent. Landlord will often compromise and be liable for gross negligence.
- Is the tenant required to pay rent even if the premises are destroyed or require substantial repair? Every lease agreement should allow for an “abatement” of rent where the leased premises are destroyed by fire or other perils and must be repaired. Tenants should not have to pay rent if they cannot use the space.
- Is the lease assignable? As your business grows, you may want to assign the lease and rent/purchase a new space.
- Can notice of the lease be registered at the Land Titles Office? If the lease term is for more than three years, it is important that notice of the lease be registered to ensure any future purchases of the property are obligated to honor the lease terms.
- Can the tenant’s trade fixtures be removed at the end of the term? Often tenants will incur costs constructing its “trade fixtures” and the tenant should be permitted to remove those items at the end of the term. “Trade fixtures” are property used in connection with a tenant’s business operations and are affixed to the premises (e.g. displays and signs).
- Are personal guarantees required? It is important to understand exactly what you are guaranteeing and to the amount being guaranteed.
Our real estate lawyer, Ryan Walter, would be happy to assist you in navigating the commercial leasing process.