11 Commercial Lease Mistakes You Absolutely Want to Avoid

If you are a small business owner considering renting a business space, you really want to avoid these commercial lease mistakes.

Failing to Match Lease With LOI

This can be a killer. The lease might have lower square footage than the Letter of Intent (LOI), higher signage and real estate broker commission and a host of surprise terms springing at you.

Not Being Clear on Use

Does your landlord frown on office parties? Are you compelled to use your gym as a gym and nothing else? Being clear on items like these determine if the lease is right for you in the first place and if you can work with it.

Settling for Too Long or Too Short A Period

Depending on what you have on your hands, you may want to tie the lease down for a long period, or it might be better for you to take it slow. If you are not clear on this, you may soon find yourself with a lease you cannot use.

Failing to Iron Out Operating Expenses

Operating expenses are like the hidden charge on your Electricity bill. If you do not iron out items like common area maintenance, you may find yourself with a monthly bill way beyond your expectation.

Landlord’s Remedies

If you default on your payments, your landlord can cause you all kinds of pain. It is your duty to know exactly what kind of pain you are looking at in the event of default.

Personal Guaranty

This is one scary provision. It makes you personally responsible for any actions involving the lease. So if you do default, your pain level will only increase with this. It means you landlord can come after your personal assets.

Not Securing Your “Sprucing Up” Rights

Everybody needs to do some sprucing up, so the place is just right. Make sure you are allowed to do this and understand any conditions attached. Must there be a particular kind of contractor? Is there a limit on the sprucing up you can do?

Subordination, Non-Disturbance, Attornment

These basically concern what would happen if someone else takes over the lease from your landlord. And it is something you should be concerned about. Make sure that your interests are protected and that the new owner cannot send you packing.

Being Unclear About Liability For Damage

If your space is damaged, not by your fault, your landlord would be responsible to repair it. However, the provisions on this repair often allow the landlord to stop at just bare repairs. If you are not careful with these, you could get stuck with the rest of the bill for getting your space back in shape.

Assignment And Sub-Letting

If you have any plans to sell your business in the future, you need to pay attention to assignment and sub-letting. If you do sell, you would still be responsible for the lease, so you need to think about negotiating a release from your obligations.

Relocation

You probably do not want this one. Some leases may allow your landlord to relocate you elsewhere on the property. And if he does, you may have to bear some of the cost. Best thing to do is refuse this clause flat out.

Don’t Let These Commercial Lease Mistakes Cost You

Now that you understand those commercial lease mistakes to look out for, you are in a stronger position. However, it can be difficult to make sense of those dense paragraphs.