Commercial lease agreements are usually more complicated than they seem on the surface. Regardless of how complex the paperwork is, it’s impotent to read through the details of the content and have a good knowledge of what is involved before signing. You should never overlook any of the clauses included in the lease agreement. Several landlords often use languages that restrict tenants’ rights or passes along excessive and unnecessary costs. It is important to carefully read the entire paperwork and ask an attorney to peruse it before signing. Your attorney will be aware of what to look out for, but these tips should help keep you informed.
Here are the seven things to keep in mind in a lease agreement:
1. Restrictions on Subleasing
If a subleasing clause is included in your lease agreement, it will allow you to rent out all or some parts of your space to another tenant if you no longer need the square footage. Subleasing clauses is required to future-proof your lease just in case anything happens. Ensure that your lease agreement contains subleasing provisions and doesn’t place strict limitations on your ability to sublease parts of your square footage to a third party.
2. Early Termination
This is one of the worst clauses that landlords include in lease agreements. The early termination clause gives the landlord an unfair advantage to terminate your lease early for any reason at all. Although you may rely on your landlord not suddenly ask you to leave your rental space, if such a clause is in your lease agreement, you’ll have a hard time fighting back if such an incident occurs.
3. Required Improvement
Make sure your lease agreement clearly indicates who is responsible for covering the costs of making improvements to the commercial building as required by law. For instance, if your landlord is compelled to rewire to comply with safety codes, revamp the building to comply with Americans with Disabilities Act requirements, or any other code or law, you shouldn’t be required to pay a huge sum to cover such costs.
4. Capital Expenditures
Some office space improvements can be a bit pricey. It’s important to spell out who will be responsible for covering the costs of a large, one-time expense like making a major repair to a parking lot or replacing an entire roof. Though it may seem reasonable for your landlord to share some of the repair costs with tenants over an extended period, you wouldn’t want to end up with a large single fee for an expensive upgrade or repair.
5. Rent Increase Rates
Several landlords increase their rents at the end of every year. You should ensure that your lease agreement contains limits on how much the rent can be raised at once. Also, make sure that the lease clearly illustrates how rent increases are to be calculated to guarantee that a fair system is in place.
6. Subordination, Non-Disturbance and Attornment
This lease agreement clause is commonly known as SNDA and you should ensure that it is included in any commercial lease you intend to sign. The SNDA clause clearly states that if the commercial space enters foreclosure because your landlord defaults on a loan you will be permitted to remain in your square footage. The clause protects you from sudden relocation because of your landlord’s inability to financially retain the building.
7. Personal Liability
Some landlords use languages that make business owners or even the officers that sign the lease personally liable for whatever debt is incurred. For instance, if your company runs into a financial problem and is unable to pay the rent, the landlord can sue the people involved personally to recoup the money. This clause could put personal savings and other assets in line.
Your lease agreement shouldn’t put you at any legal disadvantage or forever have you indebted to your landlord and his property. Rather, the lease should give you freedom to exercise your rights within the law without overriding your personal and business interests.
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