By Chad Tamaroff, Esq.
A commercial lease agreement is more than just a piece of paper; it forms the foundation of the relationship between a landlord and a tenant. While it is common for the landlord to draft the commercial lease agreement, that doesn’t mean the tenant cannot negotiate for terms that better suit their needs. A well-crafted commercial lease should be customized to reflect the unique expectations of both the landlord and the tenant.
It’s important for both parties to have a clear understanding of the key terms in the lease. These terms can have significant financial and legal implications, so having a solid understanding of what’s included is crucial. While each commercial lease is unique, there are several core aspects that should be addressed.
One of the first points to be negotiated is the duration of the lease. This defines the length of the tenancy and can impact both the landlord’s financial projections and the tenant’s long-term stability. Another key term is the payment structure — how and when rent will be paid, and whether there are any additional fees or expenses beyond rent. This section is critical, as it sets the financial parameters for the lease.
For tenants, it’s essential to consider whether they have the option to renew the lease or even an option to purchase the property. These options provide tenants with greater flexibility, should they wish to continue occupying the space or purchase the property in the future. In addition, the lease should clearly outline responsibilities for taxes, insurance, and utilities, as these costs can vary widely and impact a tenant’s budget.
The lease should also specify whether the tenant has the right to terminate the lease early under certain conditions and whether there are any restrictions on how the property can be used. This is particularly important for businesses that may need to adapt to changing market conditions.
Another critical point involves determining who will handle repairs and maintenance. This is especially important in a commercial lease, as certain repairs can be expensive, and understanding who is responsible for them can prevent disputes down the line. Additionally, the lease should address whether the tenant has the right to sublease or assign the lease to another party. This clause is important for tenants who may need flexibility in the future.
Finally, default provisions and remedies should be included in the lease to address the actions to take in the event of a breach of contract by either party. Whether the tenant defaults on payment or the landlord fails to maintain the property, both parties must understand the procedures for resolving disputes. The liability of each party in the event of a default is also an important area to cover.
Before signing any commercial lease agreement, both landlords and tenants should carefully scrutinize the document to ensure that all terms are clear and mutually understood. It’s advisable to have an attorney review the lease to help negotiate favorable terms and ensure both parties’ rights and responsibilities are adequately addressed. A well-negotiated lease protects both parties and ensures a smooth, productive relationship throughout the lease term. If you have any questions, feel free to contact me at Chad.Tamaroff@gmlaw.com.
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