Negotiating Your Commercial Lease
Making sure you are not on the wrong side of a one-sided agreement
Most businesses lease the property where they do business. The lease can be a significant investment for a business, and sometimes can even be the difference between enjoying a profit or suffering a loss. The lease can also commit a business for an extended period of time, closing off other possibilities. Consequently, it is very important that business owners negotiate carefully when choosing their lease terms and hire an experienced Arizona real estate attorney to review the contracts.
Commercial Lease Negotiation
Forming a commercial lease is very different from forming a residential lease. Commercial tenants are assumed to be more sophisticated and so they are given fewer protections under the law. Furthermore, the terms of a commercial lease are generally much more negotiable than the terms of a residential lease. The first draft of a commercial lease that is given to a potential tenant usually has terms that strongly favor the landlord. However, it is expected that the tenant will negotiate more equitable terms. The following are some basic questions that should be clearly answered in your lease:
- What is the term of the lease and when does it begin? Is there a renewal option and whose option is it?
- Is the leased property clearly described? Does it include bathrooms, common areas, or parking?
- Who pays the utilities, repairs, taxes, and insurances?
- Do you have a gross lease, a net lease or some combination?
- Is there an exclusivity clause that prevents the landlord from renting to a competitor? What is the definition of a competitor?
- How much is rent? Does the rent increase each period? Is there a cap on the amount that rent can increase?
Careful Review of your Commercial Lease
There are many, many more significant provisions that will be important in your lease. Commercial leases can become complex, and it is important that you consult with an attorney experienced in real estate transactions to ensure that you obtain a fair commercial lease that will benefit your business. Many of the real estate attorneys at Gunderson, Denton & Peterson have experience reviewing, negotiating and litigating commercial leases, and frequently counsel with clients to identify key issues and protect clients’ specific lease interests.
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