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Who maintains a commercial property subject to a lease?

| Jun 14, 2021 | Real estate

Leasing a property is often a better financial move than simply buying a property for a new or growing business. You have the flexibility to change facilities if your business model shifts or you grow more quickly than anticipated. You also have lower overhead costs than you probably would if you purchase.

Commercial leasing often requires the negotiation of specific rental terms. Commercial tenants may need to negotiate maintenance fees, rental rates or even the duration of the lease to ensure the contract suits their needs.

Maintenance itself can be an issue to negotiate with your landlord. Unlike the terms for renting residential properties, commercial leases don’t always come with a promise of landlord maintenance to the facilities.

Does your landlord offer a gross or net lease?

In a gross commercial lease, you essentially sign a lease much like what residential tenants sign. The landlord agrees to a flat monthly rental rate, and they are the ones with the ultimate responsibility to maintain the facility. You may pay more for the convenience of a gross lease, but some commercial tenants find that having a landlord to call for maintenance is best for their needs.

Other tenants agree to net leases, which may mean that a tenant has partial responsibility to care for the facilities beyond just cleaning and standard upkeep. There are multiple different forms of net leases, but all of these involve either negotiated fees for property maintenance or an obligation for the tenant to perform the maintenance themselves.

If there is a boiler in your unit, for example, you may be responsible for repairing it when it breaks even if it is already a decade old. Some landlords pass along maintenance costs in part because they know the facilities are not in ideal condition so that tenants become responsible for fixing failing systems.

It is crucial that you understand what maintenance obligations you have and which ones fall to your landlord. Looking at the condition of the unit and carefully recording pre-existing damage and concerns can help you negotiate for more reasonable commercial lease terms regarding what your landlord will fix and what you have to repair. Otherwise, you could be at risk of having both practical and financial responsibility for anything that breaks during your tenancy.

 

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