Lease agreements can be complex and boring to read, but it’s imperative that you pour over every detail before signing a commercial lease. Something hidden within the terms of your lease could cause major problems for your business, so don’t let an oversight prove costly for your business. In today’s blog, we take a closer look at some items that could be considered a red flag when reading through a potential commercial lease agreement.
Troubling Clauses In A Commercial Lease Agreement
We’re not saying that you should always walk away from a potential lease if any of these red flags are found in a contract, but know that you’ll want to have a specific plan for navigating these issues so that they don’t cause major problems down the road. Here’s what to watch for:
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Ambiguous Rent Escalation Clauses - If the rent price seems too good to be true, and there isn’t any clear indication as to how rent may increase as your time in the space continues, know that you could be in for a major rent hike in the future. There are some rules and regulations that govern how quickly and at what percent a landlord can raise rent prices, but if it’s not spelled out in the contract, expect them to bump your rate up quite significantly once you’ve settled in. Ask for a clear explanation of rent escalation clauses or see if you can negotiate a cap on annual increases.
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Maintenance Responsibilities On The Tenant - You may expect to be on the hook for certain additional expenses other than rent, but beware the contract that puts most or all the maintenance costs on the renter. One of the beautiful things about renting is that a landlord is generally expected to perform maintenance or pay for specific repairs. If these costs have been shifted to the tenant, or like a rent escalation clause, these costs are ambiguous, see what can be negotiated prior to signing a contract.
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Unwritten Promises - If the landlord has made a bunch of promises, but these aren’t expressly conveyed in the lease agreement, make sure you get everything in writing before you sign. Perhaps they have stated that you’ll receive a tenant improvement allowance or your rent will be reduced if you pay in cash, but if these aren’t in your written lease agreement, wait to sign it until they are added. Landlords can go back on their word or claim they never promised those things, and it will be difficult to prove these claims if you don’t have them in writing.
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Restrictive Oversight - Sometimes a landlord will be a little too overbearing with how they’d like their space to be used, and if you can sense that through the lease agreement, consider walking away. If there are a lot of restrictive covenants or specific use clauses that limit your ability to use the space as you had envisioned, talk with the landlord about amending the terms of the lease before you sign on the dotted line.
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Landlord Termination Clauses - Finally, you’ll probably check to see what type of fee you’ll have to pay if you decide to end your lease agreement early, but also make sure that you understand what your landlord is allowed to do in the event they decide it’s beneficial to terminate your lease. They’ll obviously enjoy the rental income that your lease is providing, but if a larger entity wants to buy the property outright, can they sell and force you to abandon all your hard work? Make sure you understand what the landlord is allowed to do in the event they ever decide to sell the property you’re leasing. If there is no specific clause or you don’t like the terms that have been given, ask to negotiate.
We can help you find the commercial space of your dreams and a lease agreement to match. For more information on finding the right commercial space for your business, reach out to the team at Commercial Partners today at (612) 337-2470.