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We have experience drafting leases for commercial landlords as well as helping commercial tenants understand and negotiate more favorable lease terms. We can also draft leases for equipment or other assets. Unless your business is virtual or based out of your home, at some point, you will likely have to sign a commercial lease for space. Commercial lease agreements are typically longer and more complex than residential lease agreements, and the tenant’s rights are often limited to whatever was agreed upon in the lease agreement.

What should you look out for when reviewing a potential commercial lease agreement?

What type of lease is it? In shared office space, you might be looking at a relatively simple gross lease where your business simply pays a set amount of rent each month while the landlord pays for everything else, i.e., utilities, insurance, taxes, and their own operating costs. But most commercial leases are triple net leases where your business will be responsible for base rent plus your share of the landlord’s other expenses. This can result in quite a bit of variation from one year to the next in the actual amount you end up paying, including surprise bills when the landlord reconciles their books at year-end and asks you to pay the difference between your actual share of the expenses and what you paid each month in estimated charges.
What is your business’s financial commitment really going to be? How much will base rent increase each year? Are there any caps on CAM charges or “common area maintenance,” a fairly broad term covering much, if not all, of the landlord’s expenses for owning and maintaining the property? Sometimes, you can even negotiate limits on how much CAM charges can increase from one year to the next. Regardless of what your lease calls these CAM charges/expenses, you may also be able to negotiate out of being held responsible for some of the landlord’s significant expenses, such as replacing the HVAC system (especially if it’s shared among multiple tenants) or structural issues like the building’s roof. Will the landlord contribute to any buildout costs or perhaps not charge you base rent during the buildout? Are you being asked to personally guarantee the rent for your business? Will that personal guarantee drop off once your business has a proven track record of paying rent on time? How much insurance will you be required to carry?
What is the permitted use for the leased space? Does it accurately describe how your business plans to use the space? Many of our retail/restaurant clients also consider whether they will have exclusivity for their type of business when the space they are considering is located in a shopping center or similar complex. After all, you probably don’t want your direct competitors setting up shop next door.
Will you have an opportunity to renew your lease on favorable terms? What about the opportunity to buy the space outright, particularly if your potential new landlord is another business owner who might one day retire or move on?
Has the landlord updated their standard agreement to actually match the terms you or your real estate agent have carefully negotiated? It’s not unusual for our attorneys to review a lease agreement that says one thing while the client insists that they or their agent were told something very different. Remember, in lease agreements, like other business contracts, it’s usually not about what you thought the terms were going to be, but instead what you actually signed.
Is there an out if the business doesn’t go as well as planned? We often see clients stuck in long-term lease agreements that they cannot terminate early and cannot assign to new owners if they sell the business or sublease to a new tenant to get relief.

SCHEDULE A CONSULTATION

Commercial Lease / Real Estate Purchase Agreement and Negotiations: $4,975
Alternative Retainer: $4,000

Commercial Lease Review and Redline: $1,475
- Short Form Lease Review (less than 10 pages): $750

Equipment Lease: $1,350
Review and Advice: $675