Commercial real estate clauses can make or break your new lease. You need to know what protective language to include in your lease to ensure that your company is covered in case of any unforeseen circumstances.
Some landlords will provide a standard lease agreement. These agreements typically outline the basic terms between the landlord and the tenant. While standard agreements cover much of what is required, they may not include specific clauses that could be important to your and your business. Some of these clauses may be obvious, but others may not even come into consideration until a company is faced with a particular situation. And, at that point, it will be too late.
Here are a few examples of clauses to potentially consider or be wary of:
- Death and Disability states that, upon the death or disability of the “critical person” (the principal person in the business), the tenant may terminate the lease agreement upon giving a certain amount of notice.
- Renewal options in a lease outlines the terms for renewing or extending an original lease agreement.
- Assignment of leaseis the transfer of a lease by a lessee to a third party, with all its rights and obligations. The assignor remains liable under the original lease contract unless expressly released by the landlord.
- Exclusives ensure that an indirect or direct competitor doesn’t move into the same commercial property.
- Holdover indicates how much the landlord can increase rent should a tenant stay past any expiration date of the lease.
- Percentage rent is an extra rental rate charged to tenants. Percentage rent can be negotiated out of the lease entirely or modified to lessen the impact.
- Demolition addresses a landlord’s right to terminate a lease if they want to redevelop or demolish the building.
- Default deals with the remedies and rights the landlord has in the event a tenant defaults on a lease.
- Relocation gives the landlord the option to move a business to an alternative location within the property.
Unless you’re a trained professional, it is near impossible to think of all the commercial real estate clauses to include in a lease. Our team of experts at the Menlo Group Phoenix, however, has been around the block more than once. Let us help you negotiate and draft lease agreements that can ultimately save your company from potential problems down the road.