Negotiating a Commercial Lease for Business Lessees

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Negotiating a Commercial Lease for Business Lessees

Commercial leases seldom follow a standard form and do not provide the same kind of protections as residential leases. While commercial leases are generally drafted in favor of the landlord, tenants may have the flexibility to negotiate more advantageous terms. Below is a summary of items that are often amenable to modification. These clauses should be reviewed carefully to ensure that the terms are understood and acceptable to the lessee.

Negotiating-a-Commercial-Lease-for-Business-Lessees-300x194Duration of Lease. As a commercial tenant, the flexibility to terminate or extend a lease, or to renegotiate the lease term is critical. The term of a commercial lease can vary greatly, but often is set at two years with the option to renew. Commercial tenants should evaluate several factors in negotiating the duration of the lease including the growth potential of their enterprise, the significance of location to their business model, and whether the business is a risk-prone venture or a more secure franchise business. In addition, the duration of the lease may present cost considerations to the lessee. In short term leases, renewal clauses are often associated with increased rents.

Rent. At the outset, commercial lessees should ideally negotiate rent increases for the specified term of the contract and for renewal options to avoid facing unexpected large rent increases during the course of the lease term.

Property maintenance. Commercial leases vary considerably in allocating responsibility for the upkeep of the property and the expenses of property maintenance. These items are often negotiable but should be explicitly detailed in the lease. Items such as how shared facilities are cared for, the calculation of utility expenses, the costs of certain repairs and whether a dollar limit exists for tenant repairs should be specified in the agreement.

Subleases, Assignments and Exclusivity Clauses. Tenants may consider adding supplemental provisions to the lease to further protect their businesses. A sublease or assignment clause gives the tenant the right to transfer the lease agreement or property if business plans are modified. An exclusivity clause prevents the landlord from leasing any premises on the grounds to a direct competitor.

Chase Law Group, P.C. has attorneys knowledgeable in all areas of commercial real estate law. They can assist you, whether you are a landlord or a tenant, in negotiating your lease, legally fulfilling your obligations and protecting your rights under California law. Contact DeAnn Flores Chase and her experienced team of attorneys at (310) 545-7700 or visit them at www.chaselawmb.com to find out how they can advise you on obtaining the most advantageous terms possible in your lease agreement.