Last Updated on: 26th July 2023, 10:54 pm

Leasing a commercial space is an expensive and serious affair, one that you cannot afford to get into without knowing the legal formalities. If you have leased out a residential property before, you should know that commercial leasing is different.

What You Should Know Before Getting into a Commercial Lease

Map your location depending on your budget. Budget is a crucial factor. However, you should look at other issues such as where your client base is located and the zoning laws in that location.

Get the right professionals involved. It is important to get the right professionals on your side so that you are well-advised throughout the leasing process. This reduces the number of issues that may crop up. Professionals include attorneys, real estate brokers/agents, architects and contractors, government agencies in your State, and development agencies. A good lawyer will have a team ready for you.

Another thing you need to decide is the office needs. Some of the questions you should ask yourself include the following. How many cubicles or offices do you require? Are there any additional rooms like a waiting room or seating area? How about light and ventilation?

You should have a budget in place. This helps to narrow down the location and also helps to have operating costs in mind.

Once you have established a building you want to lease, investigate ownership. This can easily be done through online registries for specific cities and counties. Information you should be looking for include mortgages, deeds and the history of the building.

Determine property tax on the building. In most states tenants are mandated to divide the property tax of the building amongst them.

Research zoning restrictions and make sure they apply to your business to avoid being in violation. Whatever you intend to use the building on should be acceptable under the zoning laws.

Negotiating and Reviewing the Lease

Negotiating the Terms of the Lease

After you have done your due diligence, you may contact the building owner after which you may get a lease. It is advisable that a lawyer has a look at the lease to make sure everything is in place. It is important to note that commercial tenants have fewer rights than residential tenants who are more protected by the law.

On receipt of the lease, you have the right to negotiate the terms before signing it. You can respond to the lease through a letter. The letter should propose revisions to the landlord. This is often called a term sheet and contains your reviews and your propositions.

After negotiating the terms, your attorney should go through the lease before you sign it. After you sign the lease, you are not able to negotiate, and so this is an important step.

Reviewing the Terms of the Lease

The lease agreement should contain the street address of the rental space. This serves as a description. If the building has rest rooms out of the office and any storage space associated with the lease then this should be included as well. The amount of rent and annual increments should be stated in the lease. A security deposit is the norm and should also be listed. Usually, landlords will ask for a security deposit of 2-3 months. The landlord should give the tenant a period when they will not pay rent as they are conducting renovations.

Every lease has its own terms and options to renew. This should be in the lease agreement. You should have an idea of how long you wish to rent out the space so you can make sure the lease includes it.

Termination of the lease should be included. Some landlords reserve the right to end your contract if they sell the building. You should look out for this. If the lease is ended before term, then the landlord should compensate you moving costs at the very least.

You should know the limits of your space. There are certain things you are allowed to do and others that you are permitted from doing at the building premises. All of these should be clearly written in the lease.

Lease agreements often contain complicated language, which if you do not understand, may end up being a liability on your part. Get a lawyer to review your lease agreement before you sign it.

Embarking on a Commercial Lease Journey: What You Need to Know

Leasing a commercial space is a significant and costly undertaking that requires thorough knowledge of legal formalities. Unlike residential leasing, commercial leasing bears marked differences that should not be underestimated. To ensure a smooth leasing process, consider the following factors:

Location, Location, Location

While the budget plays a pivotal role in determining the ideal location, you must also take into account the proximity to your client base, local zoning laws, and the surrounding community. Choosing the right location is crucial to your business’ success and growth.

Assemble Your Professional Dream Team

Enlisting the right professionals for your leasing journey can mean the difference between a well-advised process and a potential disaster. Partnering with expert attorneys, real estate brokers/agents, architects, contractors, and government and development agencies can significantly minimize unforeseen issues down the line.

Assess Your Office Needs

When considering a commercial lease, ask yourself about your desired layout and required amenities. Determine how many cubicles or offices your space needs, if there are additional rooms required such as waiting areas or conference rooms, and the importance of natural light and ventilation in your workplace.

Put Your Budget in Place

Setting forth a clear budget will not only help you pinpoint the ideal location but also allow you to maintain realistic operating costs upon leasing the space.

Investigate the Building Ownership

Before signing the dotted line, take the time to research the ownership history of the building in question. Online registries of cities and counties offer valuable insight into mortgages, deeds, and any pertinent building history.

Account for Property Taxes

In many states, tenants must collectively split the property tax of the building. Research this requirement and ensure you understand its financial implications before moving forward.

Verify Zoning Restrictions

It is paramount to confirm that your intended business use aligns with local zoning restrictions. Failure to adhere to zoning laws can lead to severe penalties and business interruptions.

Master the Art of Lease Negotiation and Review

Negotiating the Terms of the Lease

After conducting thorough research, engaging with the building owner, and receiving a lease, it is strongly advised to have a lawyer review the lease to safeguard against any potential pitfalls. Of note, commercial tenants possess fewer rights than residential tenants and are therefore more vulnerable in terms of legal protections.

You reserve the right to negotiate the terms of the lease before signing it. A written response, often referred to as a term sheet, outlines your proposed revisions to the landlord. Once negotiations are complete, enlist your attorney to perform a final lease review before moving forward and signing the document.

Reviewing the Terms of the Lease

Lease agreements should include a detailed description of the rented space, including restrooms, storage areas, and any additional areas included in the lease. The lease should also clearly state rent amounts, annual increments, and any required security deposit (typically 2-3 months’ rent).

Most lease agreements include clauses outlining rent-free periods to accommodate tenant renovations. Be sure to understand the specifics of lease duration, renewal options, and any potential termination clauses. For instance, some landlords reserve the right to terminate the lease if the building is sold, which could result in abrupt relocation expenses.

The lease should also clearly delineate your boundaries within the space, specifying any allowed or prohibited activities on the premises. It is vital to retain legal counsel to review your lease agreement and its intricate language to avoid unwittingly incurring liabilities in the future.

Conclusion

Armed with the knowledge of commercial leasing intricacies and a team of experts at your side, you can confidently embark on your commercial leasing journey. Don’t be afraid to negotiate, seek specialized assistance, and review every detail to ensure your business venture’s ultimate success.