What To Know Before Signing A Commercial Lease

Commercial lease negotiations can be tricky. Fear can be a huge detriment to any negotiation process, and you must enter into your commercial lease agreement knowing your terms.

To give you an idea of the terms you should be looking for, we have provided this helpful guide on what to know before signing a commercial lease. Learn more about lessee vs lessor to have a smooth partnership

This guide will show you the differences between commercial and residential leases and the professional advice you should be looking for during this process. Keep reading to ace your subsequent commercial lease negotiations.

Top Things To Know Before Signing A Commercial Lease

You may have found your perfect commercial office space, but before you put pen to paper and sign a commercial lease, you need to know what you’re signing up for. If you don’t read the fine print, you could end up with a burdensome lease or face unexpected costs down the line. Keep reading to learn how to protect yourself and your business interests before signing a commercial lease.

Get The Advice Of A Real Estate Agent

You will likely not possess the knowledge or experience to perform lease negotiations and analyze the property’s location yourself – and it may take some time to equip yourself with this knowledge. So, before you sign anything or even decide on a property for your business, it is prudent to enlist the services of a real estate agent. Your agent will be briefed on your specific needs and will be able to perform negotiations and find properties in line with your interests.

The Rules For Business Rentals

When you rent a residential property, you are entitled to certain protections and rights not present for commercial leases. You need to understand the differences between commercial and residential leases and what you should be asking for, and your entitlements.

When you rent a residential property, you are granted assurances that your rental payments will be set in place, and you will not have any unexpected costs arise down the line. However real estate expert Darren Robertson states that renting a commercial property is much different:

“Landscaping, security, and waste disposal costs could appear down the line and add to your monthly overheads. So, ensure that your real estate agent or legal counsel briefs you on the differences between residential and commercial rentals before proceeding with your commercial lease.”

You Have A Right To Negotiate

Effective communication can protect you from selling yourself short and accepting unideal terms. When you sign your commercial lease, you should be aware of your right to negotiate. If there are terms in the lease you’re not comfortable with, or you aren’t happy with the stated costs, you need to voice it. If you have your heart set on the property, you might weaken your approach to negotiations. 

If you lose a property because they would not offer you agreeable terms, it will be better for your business in the long run. Remember, you don’t have to perform the negotiations yourself – simply discuss your terms with your real estate agent, and they will handle the heavy lifting.

Get Legal Advice Before You Sign

If you sign without legal advice, this could negatively affect your business. Once you sign, the agreement is legally binding. Before signing, you need to enlist a lawyer to review the lease.

Right Of Refusal

Right of refusal is one of the most important considerations you should make before signing a lease. If you do not have the right of refusal, then this means that your landlord could sell the property during your lease to another owner. This owner could then raise your rent at their discretion. 

When you gain the right of refusal, you ensure that your landlord must first offer you the chance to purchase the property before putting it on the market. This way, you won’t face a sudden rental increase that could jeopardize your business.

Perform A Property Assessment

Before you sign the lease, you need to know that there aren’t any hidden issues with the property that you may have to foot the bill for. If there are issues with the property, you could end up with a commercial property construction site instead of a storefront or office down the line, which will inhibit your ability to perform daily business operations. So, to ensure you’ll be getting what you signed up for, it is advisable to conduct an assessment on the property.

When Your Lease Ends

One of the critical things to look for in your lease agreement is when the lease ends. You must note this date to ensure you have enough time to decide whether you’ll renew your lease or find another property. Your landlord should remind you of this date as it draws near, but you can’t always rely on this. If your lease portfolio is larger than just a handful of leases, you’re better off using a lease management software that centralizes documents, contacts and lease terms for multiple locations under one platform. A smart lease administration tool should also trigger timely automated notifications and email alerts, before lease expiration, that are sent to stakeholders within your organization.

You also need to know whether you have the right to terminate your lease early, as the growth of your business may mean that you require a bigger office space.

Summary

Your commercial lease agreement is a legally binding contract. You should not take the lease agreement process lightly, and you should use all of the resources at your disposal to ensure that you don’t end up stuck in an unfavorable lease agreement. Hopefully, this guide has equipped you with the knowledge to make more informed decisions regarding your commercial lease agreements.