Understanding Commercial Lease Agreements
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UPDATED: Jul 16, 2021
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In general, the commercial tenant is considered more savvy than the residential tenant, so the law offers fewer built-in protections within the commercial lease. For instance, the eviction process has fewer safeguards for the business tenant. It is easier to evict a commercial tenant than a residential one. Furthermore, while you are occupying the property, the required 24-hour notice granted the residential tenant is not usually a standard part of your commercial lease.
The commercial lease agreement is not usually a general form like the residential lease, but is tailored to meet the expectations of the specific parties. Therefore, negotiating satisfactory terms is crucial for a successful lease agreement between the business tenant and the landlord. An unfavorable tenancy could hurt your business and cost you money later. Usually, the term of the commercial lease will be much longer than most residential leases. That is another reason why you must be satisfied with your negotiations and subsequent business agreement.
Know What You Are Signing Before You Sign
It is extremely important to know what you are signing. Walking into a commercial lease agreement without satisfactory negoiations or clarity of the lease terms spells a disaster. For example, you will want to understand whether your lease has:
- Provisions restricting the landlord from renting to competitors or those who might hurt your business in some way.
- Limitations or restrictions on your ability to change the property to suit your needs.
- The option to renew after the lease term expires, so you don’t have to move your business.
These clauses could have a major impact on whether the property is right for your business. Questioning your landlord and getting professional help from a real estate attorney who can interpret the provisions of your agreement before the signing, are good ways to avoid an unsatisfactory commitment.