Protecting Your Interests In Commercial Leases
Our practice involves the review and negotiation of commercial leases. All business owners, except those who own their own premises or work out of their homes, will need to enter into a commercial lease. For many business and professional practice owners, far too little attention is given to legal lease issues. The commercial lease document is often long and can be daunting to read. Also, if you are buying a business or starting a franchise, it is easy to become distracted by your purchase transaction.
Our Process And Services
We often categorize issues into areas of high, middle and low concern after reviewing a lease. This lets us work with clients by focusing on the more important terms and working our way down the list. After this review, clients can decide if they want to deal with the landlord or use our services (or sometimes their broker) to negotiate the terms or changes to the lease.
Most prospective tenants focus on economic factors such as:
- Setting rent levels
- Length of leases
- Options to extend
- Periodic rent increases
- Establishing appropriate deposits
Many forego legal assistance thinking that the remaining issues, which are noneconomic, won’t affect them much since they are standard provisions.
The Importance Of Noneconomic Provisions
When you think that the legal and/or standard lease provisions do not need much attention, consider that most so-called noneconomic provisions have dollar consequences. For example, if you negotiate an option to extend your lease for five years and the lease also states that the option can’t be transferred to a new tenant (i.e., the future buyer of your business), when you go to sell your business and transfer the lease, the new tenant (new buyer) won’t get this option to extend and your selling price may be affected.
Keep in mind that there are no standard terms; almost all leases were custom prepared for the landlord and provide favorable outcomes for it, but not necessarily for the tenant. One final thought: Try to get a copy of the proposed lease (or existing one if the lease is being assumed) as early as possible to avoid being rushed into decisions.