Understanding Your Commercial Lease Agreement Series
When starting or expanding your business, you’ll likely be looking at leasing a new commercial space. Some small (and a few large) businesses may go from startup to dissolution without entering into a commercial lease agreement, but the vast majority of businesses will at some point need a place to house employees, store inventory or supplies, and meet with clients and customers.
Indeed, for certain businesses, the location of a commercial space can be one of the most influential factors in their entire business plan; a commercial lease agreement may be one of the largest contracts into which a business will enter.
Understanding what goes into a commercial lease, what landlords want from tenants, and what tenants can expect and should ask of landlords, will help you minimize the risk and cost associated with your space. A solid commercial lease agreement can help your business get the most out of your new commercial space.
Over the next several months we will dive into the details of commercial leases, particularly as they relate to technology companies and other businesses seeking commercial office space. This iVLG blog series on commercial leases will seek to educate companies on what to expect from the leasing process, what to look out for when negotiating a commercial lease as a new or expanding company, and how to get the most out of your new commercial lease. While our series will not cover every issue you may encounter in the leasing process, it will give your business a solid foundation for getting more out of the commercial leasing process and your new lease.
A thorough understanding of the issues will help ensure you have adequate risk protection and remedies in your commercial lease. This can help you avoid issues associated with destruction, damages, or nuisances that might severely affect your business. Also, by properly drafting certain provisions, you can ensure the landlord passes through only reasonable expenses and that you have a clear and complete understanding of the costs, which can help give your business certainty and protect your bottom line.
The posts will be broken down as follows (with possible new additions if requested):
- The advantages and disadvantages of hiring a broker to lay the groundwork and help you identify your space;
- The space planning and early stage commercial lease process;
- Commercial lease letter of intent basics
- Commercial lease structures, including base year, NNN (net), gross, and modified gross leases;
- Rent, free rent, and additional rent;
- Tenant improvement allowances;
- Security deposits, letters of credit, and personal guarantees;
- Operating expenses, common area maintenance expenses, and “other pass through expenses”;
- Utilities, maintenance, and repairs;
- Damages, destruction, and business interruption;
- Insurance, subrogation, and indemnification;
- Landlord and tenant default;
- Subordination, attornment, and non-disturbance,
- Miscellaneous contract terms;
- Options, right of first offer and refusal, and expansion rights;
- Rules and regulations and other exhibits;
- Architects, engineers, contractors, designers, and tenant improvement work letters.
We hope this is a helpful resource for businesses who are seeking to lease commercial space, and for those who want to better understand their current commercial lease agreement and their options when re-leasing.
If you’d like to learn more about commercial lease agreements or if you need assistance understanding and negotiating your commercial lease, please contact us.