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What to Watch for in a Commercial Lease

Although the COVID-19 pandemic deemed commercial leases virtually nonexistent for almost a year, the public office spaces are slowly but surely coming back in style. With people across the world steadily migrating out of their home offices and back into working at their commercial office space, it is time to review what to know about renting and leasing out commercial spaces. Whether it is an office, retail space, or warehouse, the lease is often one of the largest expenses for businesses, and care should be taken to make sure it is right for your business or franchise.

What to Watch for in a Commercial Lease
What to Watch for in a Commercial Lease

Renewal Clauses

Commercial leases typically have a longer rent time than a personal lease. However, each lease varies in its renewal clauses. Make sure to look for clauses in the lease that point to what happens when your lease ends, and whether you have an automatic or optional renewal agreement. With either option, the deadlines to renew your lease is critical, especially if you want to renegotiate the terms of your existing lease or cancel it all together. You should mark these deadlines in a calendar to ensure you are protecting all your options.


Arbitration Clauses

In the event of a dispute between you and your landlord, it is helpful to know if the lease contains a clause regarding mandatory arbitration. By settling a dispute through arbitration, you would not be going to court for litigation. If this is the case, then make sure you have the ability to select your own arbitrator and can make other key decisions.


Consumer Protection Laws and Regulations

There are fewer consumer protection laws that govern commercial leases than residential leases. For instance, in commercial leases, there are no caps on security deposits, and there are no rules concerning the protection of a tenant’s privacy. Since there are fewer overall legal protections, be cautious of deceitful landlord practices trying to negotiate a better agreement for themselves instead of a mutually beneficial outcome.


Sublease Abilities

Even if you do not want to sublease out your space at this moment, you never know when you may want to change your mind or assign obligations to a new assignee. Thus, watch out for sublease and assignment clauses that would give you the abilities and rights to rent a portion of the property or the entire space. Even if you sublease your space, your original lease with the landlord may hold you liable throughout the sublease period. Make sure you read the hidden obligations carefully before signing the lease or sublease.


Lease Agreement Terms

There are many key terms you should know regarding commercial lease agreements. Typically, this is handled by an attorney, but you may still encounter them on your own. Terms such as usable square feet, bottom line, grant of lease, commencement date, and extension are helpful elements to know and review before signing your name on the dotted line.


Conclusion

Leasing a commercial space is an important part of owning a business if you are not able to purchase your own building. . Whether this is your business’ first location or just relocating, it is a big decision both financially and physically. Make sure you are performing due diligence while researching and evaluating the potential property spaces and their reviews. When in doubt, its best to have a business or franchise attorney help you make the wisest decision concerning your business’ next move.


Dye Culik PC is a law firm serving small businesses and franchises in Charlotte, NC and surrounding areas. Our attorneys focus on business and franchise law, including business litigation, starting your own business, and in-house counsel services. If you have a question about what to do, contact us at 980-999-3557 to see how we can help you succeed. Also, visit us on Instagram for the latest updates on our local community and its small businesses.