Leasing commercial property can help a business connect with new customers and/or expand into new territory. However, every commercial lease involves a degree of risk. The business owner or executive planning an expansion to new facilities may need help reviewing the lease and negotiating to protect the business from overextension and other issues.
During the initial stages of reviewing a commercial property for suitability and determining the baseline lease terms, there are certain details that a business executive or owner likely needs to review carefully. If the terms are unfavorable, they may potentially need to negotiate with the property owner.
What lease terms may have the biggest impact on a company?
Maintenance responsibilities and costs
Unlike residential leases, commercial leases often make tenants responsible for maintenance. If they do not have to perform maintenance and repairs, the business tenants may have to pay costly fees. Common area maintenance (CAM) fees may represent a set monthly payment or a fluctuating amount based on the landlord’s expenses. There may also be set fees imposed for standalone facilities. Business owners need to consider what types of maintenance they can perform and how much support they may need from a landlord before agreeing to a specific maintenance or payment arrangement.
Lease duration
Commercial leases tend to be multi-year contracts. It is standard practice for landlords to expect tenants to sign leases for anywhere from two to five years. Some leases may last even longer than that. Tenants may need to negotiate regarding the duration of the lease if they anticipate the business growing before the lease ends or if the company is new. Startups often need to switch focus or move into different markets to achieve success. Securing a shorter lease duration can make it easier for businesses to grow or to move on to a new market where there may be more demand.
Early termination rules
If something changes at the organization before the end of the lease, the landlord typically expects the tenant to continue paying until the lease ends. Even if they vacate the unit, the landlord may seek payment for the full duration of the lease. Tenants therefore often need to negotiate terms that apply in an early lease termination scenario. Asking to include a force majeure clause in case of unpredictable events or lease assignment terms can make it more feasible for a business to terminate a lease early in specific situations.
Having support while reviewing and negotiating commercial lease terms can make a major difference for business owners and executives trying to find the right facilities for a company. Lease terms can play a major role in a company’s success and long-term growth.