Stephen Kaplan, P.C.

What should businesses look for in a commercial lease?

Many businesses find leasing or renting property to be the ideal situation for their individual needs. Rental arrangements can allow a company to focus their resources on other areas and allow them a measure of flexibility.

If you've determined leasing is the best fit for your company, it's important to know what to look for when it comes to commercial leases. Here are a few areas to pay attention to:

Length of lease

Your company roadmap and plans may be significantly different than what your landlord has in mind for a tenant. Therefore, it's important to pay attention to the expected length and material terms of a lease.

If you're planning on a major expansion milestone but the commercial property doesn't allow modifications to the building or its structure, that could be a nonstarter.

Possible lease outs

The longer your expected lease, the more important possible opt-outs become. Nothing in business is guaranteed and being able to shed costs (like an expensive lease) can be a boon to struggling companies.

Make sure the lease spells out any possible ways out of the lease, like finding a replacement tenant or having the right to sublease some or all of your space. You also want to address your landlord's right to relocate you in the building and whether you want the landlord to have that right or option, and if so, at what cost and at whose expense. If you and the property owner come to a verbal agreement about lease options, make sure to get an updated lease before you sign.

Assignable or not

If someone offers you a price too good to refuse on your company, you may be tempted to sell. If that's the case, you would need to have a right to assign the lease to the new business owner(s). Landlords often prohibit assignment without their express consent and possible financial considerations.

Similarly, Landlords sometimes address a material change in a tenant's ownership in their lease terms. Those items need to be read carefully to preserve your rights as a tenant and the rights of the future owners or controllers of your company.

Understanding how your commercial lease can affect your business decisions is crucial.

Sweating the details

Finding the perfect spot for your business takes a lot of work and a lot of searching. This may be why so many business owners overlook important details on their lease agreements.

If you’re considering several locations, finding a lease that fits can be helpful. Talking to a skilled attorney can help you determine if a lease supports your business’s needs both short and long-term.

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