Leasing Commercial Real Estate: Read the Fine Print

November 13, 2015

Choosing to rent a commercial space for a start-up business is usually the most economic decision during the early years of the company. It is critical to the future of the business that buyers understand the ins and outs of leasing commercial real estate as well as the best way to negotiate terms that could greatly impact profit and future success. Having the appropriate facts will not only reduce the normal stresses associated with taking the leap into a brand new business, but will also protect your business for years to come.

What is a Commercial Lease?

A commercial lease differs from a residential lease in many ways. A commercial lease is used for people who will be serving the public and not used as a residential dwelling. Because a commercial lease is used for something completely different, many of the familiar terms associated with residential leases do not apply. Such as:

• Commercial leases are not protected in the same way. For example, commercial leases typically do not have terms that protect privacy (because you are using it for the public) or terms that limit security deposits.
• Because both sides will have a lot of money at stake, the terms set forth in the commercial lease are not as easy to get out of as breaking a lease in a residential situation may be.
• Commercial leases have the ability to be less structured and routine. Most commercial leases are unique and created per the specific needs of the landlord. This can vary greatly based on the location of a particular city, the type of building, and even just the financial needs of the owner.
• Because the lease agreements can vary as mentioned above, there are is usually much more room for negotiation. Remember, the as-is lease agreement is typically designed to be much more in favor of the owner and not the renter.

Negotiating Commercial Leases

It is absolutely critical that potential renters understand that they can negotiate any or all of the commercial lease. There are a number of factors you must consider:

• Will the dwelling be a great spot for business not only for now, but also the future?
• Think about the growth of the business. Will the rent and the length of the lease compliment business goals or potentially hinder them?
• Make sure the lease does not limit your ability for success. Little things such as being able to create appropriate signs or place bowls of water outside for customer’s dogs could become big issues later.
• Consider the type of modifications you may need to make. Sometimes, as businesses grow there is a need for structural enhancements to the building. Make sure that the lease allows for that.
• Make sure that the area is accessible to people with disabilities. If it is not, make sure it is clearly defined who is financially responsible for making those necessary changes.

Contact a Real Estate Attorney

Leasing commercial real estate is not easy. It is important that people understand what their lease terms are and how they can negotiate those terms to enhance their business long-term. If you are interested in leasing commercial real estate and would like help with the process, please contact California real estate attorney, California Real Estate Attorney, Kristina Reed. Conveniently located in Sacramento, CA, she has years of experience with commercial real estate in the state of California, and she is ready to answer your questions. Only a phone call away!