Category: Commercial Real Estate

Aug 13 2013

Considerations for a New Lease

Leasing space, whether it is an office, a storefront, or a warehouse, can lead to many different questions. Commercial leases are traditionally long, and not known for their readability. This list, while mostly written from the tenant’s point of view, will list a few things to consider when evaluating a lease.

  1. Insurance – Who is responsible for maintaining insurance on the property and are there set levels. If the tenant is only renting a portion of the building, will that tenant be responsible for contributing to a general insurance policy that the landlord holds on the building?
  2. Taxes – Most commercial leases dictate that tenants will pay a proportionate share of the property taxes. If the tenant is taking the entire property, can they grieve the taxes? If not, can tenants request that the landlord file a grievance to lower the property taxes?
  3. Renewal periods – Does the tenant have the unilateral ability to exercise the renewal periods or does the landlord need to approve it? Are the rents set for the renewal periods or are they subject to the market at the time? For a tenant, it is better to have a set rent for each renewal period.
  4. Build-out budget – Is there a budget for a build-out? How much is the landlord willing to pay to make the space meet your specifications? If the answer is “nothing,” then is the landlord willing to forego rent for the first three to six months so that the tenant can pay for the build?
  5. Competing businesses – The tenant may want to keep competing businesses out of the space, especially if it is a shared building. However, look at the landlord’s reach – does the landlord control the building next door, or across the street? If so, can the “No Competition” clause be extended to cover those properties as well?

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