Renting a commercial space may seem like a relatively straightforward transaction, however, there are numerous pitfalls to consider when negotiating a lease.
It’s not just the rent you need to worry about. There are operating costs, management fees, renewal rights, assignment and subletting terms, insurance clauses, demolition and relocation clauses, etc.—all of which you need to ensure you understand before signing a lease.
The terms of a lease can be difficult to understand, and sometimes this is done intentionally by the landlord. The words used are carefully chosen by the landlord (who has most likely hired a lawyer to draft the lease). The lease will outline the terms for a number of specific events that could potentially occur. These events may not be a risk to you today but they could be tomorrow, and if any such event does happen, do you understand what that means for you?
Consider this scenario: you’re a small business owner who didn’t have extra cash to splurge on a lawyer when negotiating the terms of your commercial lease, so you reviewed it yourself and worked out the terms with the landlord who seemed like a friendly, easygoing guy. Now, two and a half years into your lease, without warning the landlord has sold the property to a developer and the building is going to be demolished in 60 days to make way for brand new townhouses. According to the lease, the landlord bears no responsibility for your relocation so it’s up to you to vacate the property and quickly find a new commercial space. Now if a lawyer had reviewed the lease beforehand, they would have flagged this clause and worked with you to best protect your interests.
Not only can a lawyer help you understand the terms of your lease and point out anything that is missing from it, they can identify typical pitfalls that a tenant may encounter and help protect your interests.
You may also want to ensure there is flexibility in your commercial lease to accommodate the growth of your business. For instance, maybe you’re a fast-growing start-up that needs to expand into more space sooner than you anticipated—do you have rights of first offer as a condition in your lease on any space that becomes available? If not, you may be stuck looking for additional space elsewhere.
On the flipside, maybe your business isn’t growing as quickly as you expected or maybe you took on more space than you actually needed—do you know what your rights are as a tenant if you think you may need to give space back to the landlord or are looking to sublease part of your space?
It’s wise to discuss these potential scenarios with a lawyer so that they can ensure you are protected in the lease should any of these situations occur.
Ultimately, having a lawyer review your commercial lease when you are in the process of finalizing a space will enable you to negotiate terms that are important to you and protect you if something goes wrong. Think of it as a small investment that could save you a lot of money in the long run and avoid a potential court battle with a difficult landlord.
Several Caravel lawyers specialize in real estate leasing and have extensive experience with commercial leases. They are well-equipped to look after your best interests in a professional and efficient manner. If you have questions about your commercial lease, please get in touch with us.