Clauses to Be Apprehensive About in Your Commercial Lease

Part of the Negotiating Commercial Leases & Renewals For Dummies Cheat Sheet

Just as it's important to include certain key terms in your lease, you must also be cautious about what terms are in the lease to begin with and how they may affect you. You may want to remove or adjust some of the following items:

  • Holdover: This provision indicates how much the landlord can increase your rent should you stay past any expiration date of your lease. This may never come into play for many tenants, but there may be situations in which you must remain in your space an extra couple months, and your rent potentially doubling or tripling during that time could be very costly.

  • Percentage rent: Some landlords require this extra rental rate for tenants, and it can cut a significant amount of money from your bottom line if you're not aware of how these numbers work. Percentage rent can be negotiated out of the lease entirely or modified to lessen the impact.

  • Radius restrictions: Opening up a second location? Not so fast. A landlord may have a unreasonable or large radius restriction preventing you from opening your second location as desired.

  • Demolition clauses: Does the landlord have the right to terminate your lease if they want to redevelop or demolish the building? This is the section you must look for to see what rights the landlord has and what compensation, if any, you would receive should the landlord demolish or redevelop the building.

  • Default clauses: This is the section of the lease with all the teeth. You need to understand what remedies and rights the landlord has in the event you default on the lease and determine if they're reasonable or not.

  • Relocation clauses: Many leases have relocation clauses that allow your landlord to move your business within the property. You need to pay close attention to the wording of this clause or it could turn out to be a costly scenario should it ever occur.

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Negotiating Commercial Leases & Renewals For Dummies Cheat Sheet

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