Entering into a commercial lease agreement is a significant financial and legal commitment. It carries risk for both tenants and landlords, and the agreement itself can be complex with terms that are often difficult to understand.
Before committing to a commercial lease agreement, it’s essential to review the agreement carefully and feel confident that you understand the terms in their entirety.
Bear in mind that unlike most residential lease agreements, commercial lease agreements are 100% negotiable, and there are many provisions within the agreement that should be negotiated. It’s always advisable to work with a commercial real estate attorney to ensure your interests remain protected.
The Dos and Don’ts of Reviewing Commercial Lease Agreements
Commercial lease agreements can be overwhelming, and perhaps because of their overwhelming nature, it’s all too easy to overlook important provisions when reviewing them. Below are a few common pitfalls you should avoid when reviewing a commercial lease agreement to best protect your interests.
DO Understand Every. Single. Lease. Term.
Lease terms for commercial properties are complicated and filled with legal jargon that can confuse even the most astute investor. It is essential to review the terms with an attorney carefully and ask questions to ensure that you understand each and every term, as well as its implications.
DON’T Forget to Account for Maintenance and Repair Obligations
Part of your lease review should be accounting for all expenses. Things like maintenance expenses, property taxes and utilities should never take you by surprise. Moreover, there may be other expenses and obligations you may be responsible for depending on the type of lease agreement you’re entering into.
Review your lease structure to understand your obligations. Triple net (NNN) leases are among the most common lease types in Florida. With these, the tenant pays rent, taxes, insurance, plus common area maintenance (CAM) expenses (for tips on negotiating NNN lease renewals, check out this post).
DO Understand the Termination Clause
The termination clause is a critical component of a commercial lease agreement, as it outlines the circumstances under which the lease can be terminated. This includes the notice period required and any penalties that may apply for early termination.
DON’T Forget to Consider Future Growth and Expansion Needs
Lastly, don’t forget about your future. Consider your business’s growth and expansion plans as part of your commercial lease review process. Commercial leases are long-term agreements, and it would be a shame if your growth plans were thwarted by an ill-phrased provision. These and many other provisions of a Florida commercial lease agreement should not be overlooked. Remember, they’re all up for negotiation. Before signing any commercial lease agreement, give us a call at the Law Offices of Alex D. Sirulnik, P.A. We will help you review and negotiate a strong and favorable lease agreement for your Florida business
