Clauses to Make Sure to Get into Your Commercial Lease
When you're negotiating your commercial lease, there are a few things that should absolutely be in there. Including all of the following items in your lease is strongly recommended:
Corporate entity: If you've formed a separate corporation for your business, it is critical that this entity be identified as the "tenant" in all documents. You typically form a corporation for legal protection and accounting/tax benefits. Without your corporation as the tenant in the lease, you may lose all of these benefits and protections.
Renewal options: Although you may never truly exercise your renewal option but rather choose to negotiate each renewal term, you should have this safety net for your protection, especially if your location is critical or your business is difficult to move. It is also important to ensure that your renewal options are not personal to you as the original tenant because these renewal options may be extremely important to any potential purchaser of your business.
Assignment rights: Although almost every lease has some form of assignment rights, you must ensure that these are reasonable and allow you to sell your business and transfer the lease. Your assignment rights should permit you to transfer the lease, subject to landlord's reasonable approval, and outline the steps, including timelines to complete the transfer. You must also be cautious of existing language within this clause; in some cases, the wording allows the landlord to simply terminate your lease if you request an assignment or allows the landlord to remove renewal options or other terms for the new tenant.
Tenant inducements: Although this is a negotiable point, the vast majority of landlords are willing to and expect to provide free rent or tenant allowance to a tenant with a new lease. This isn't limited to tenants signing a new lease, but should also apply to tenants looking to renew their lease. Tenants often leave money on the table because they don't know to ask for these items or that they're common.
Signage: Visibility and exposure may be critical to a business owner. Signage is something that must be clearly defined in the lease agreement, especially pertaining to where you can have signage and what the costs are.
Parking: Parking is important to both you and your customer. Often, tenants assume that parking is something they can deal with later or that won't be an issue, but as with most things in a commercial lease, if it's not in writing, don't count on getting it.
Exclusives: Ensuring that an indirect or direct competitor doesn't move into the same shopping center can have a substantial impact on your bottom line. Not only is it important to include such language, for many tenants, the exact wording of the language can make all the difference.