September 25, 2020

Tips for Searching for a Commercial Lease

Why is a commercial lease so important to have?

  • Commercial leases are very important and serve as each parity’s “rule book” during the term of your commercial lease.  A wise person once said:  *Going in to a commercial contract we are all friends, but exiting a commercial contract is typically a different story.”  This is wise to remember when a potential landlord is pressuring you to sign their prefabricated version of a lease, written by the landlord’s attorney. Your France Law Group small business attorney can help make the commercial lease terms more equitable and protect your interests in times of need.\
  • A lease lasting more than one year is required to be in writing.  Generally speaking, a commercial lease serves as a binding legal contract between the small business tenant and the commercial landlord.  It is important that both sides have legal counsel to help ensure that your commercial lease agreement thoroughly addresses rules, expectations of the parties, policies, conflict resolution procedures, tenant and landlord responsibilities, and much more. 
  • Snow removal is just one example of something that may be overlooked when entering into a long term binding contract with a landlord.  Suppose you rent commercial space in a strip mall.  We all know that the annual amount of snow fall in Toledo, Ohio can be massive.  Who will be shoveling the large parking lot and sidewalks?  Unless you are going to be personally shoveling the parking lot, who is going to pay for the professional snow removal services, each time it snows?  This and other lesser known lease insights can be covered with an equitable commercial lease.

Do you know the difference between a “gross” lease and a “NNN” lease? 

  • Gross Leases are one of the most common types of commercial leases and can be very popular with tenants. In most cases, tenants simply pay a base rent and enjoys the predictability of a stable monthly rent expense.  This is similar to  “full service leasing” as the landlord typically pays for utilities, common area maintenance, common area janitorial, building repairs and improvements, parking lot maintenance, property taxes, and certain types of insurance.  Tenants need to read the lease terms carefully and will likely be required to obtain liability insurance for property and incidents which may relate to their business.
  • NNN (“Triple Net”) Leases typically start with a lower base rent, however the tenant is responsible for most other costs such as utilities, property taxes, building insurance, common area maintenance and upkeep, and other building operating expenses.  In situations involving multiple tenants, such as a strip mall, it is common for some of these expenses to be billed pro rata among the various tenants according to the percentage of space that each tenant occupies..  Again, read your particular lease carefully and budget accordingly.

Below is a quick reference guide to various types of commercial leases: www.squarefoot.comAuthor: Brandon Carter, January 20, 2020