Top 10 Commercial Leasing Issues Before Signing Lease

Launching a new series that will help to focus on issues related to commercial leases and more complex commercial leasing issues. You will discover that one or more commercial leasing issues are crucial for your company and how it operates in the area when it comes to a commercial lease. There are various other clauses in the commercial leasing issues that you should review before signing, aside from the standard commercial terms like rent, period, and square footage. Here are the top 10 commercial leasing issues with commercial leasing before signing a lease, that we believe firms are now facing:

1. PASS-THROUGH OF OPERATING COSTS AND MAINTENANCE

One of the major commercial leasing issues is operating costs and maintenance. These conditions may be extensively negotiated depending on the lease structure. For instance, there are a number of factors to take into account in a triple-net structure (where the costs of owning and operating the entire building are passed through to the tenant), such as imposing limits on increases in operating expense amounts over the term of the lease, excluding specific costs that can be passed through, and imposing tenant audit rights.

2. THE LEASED PREMISES

Although it can seem like an easy matter, it is crucial to have a complete and accurate description of the leased premises. This might be especially important in the case of new construction, when the square footage of the space (which often determines the amount of rent and the tenant's share of running expenditures) is frequently simply an estimate at the time of lease signing. Commercial leasing issues are common if you have no knowledge of legal procedures for leased premises.

3. BUILD-OUT / TENANT IMPROVEMENTS

In order to ensure the on-time delivery of the space, it is essential to have specific instructions for the initial build-out of your space, including who is accountable for what, who pays for what, and the order in which the build-out must occur. Due to inadequate planning and the necessity to resolve differences between the parties when the project does not go as expected, leases frequently go wrong at this stage, and turn out to be commercial leasing issues.

4. REPAIRS AND MAINTENANCE / FUTURE ALTERATIONS

The lease should specify who is accountable for what obligations for space maintenance and repairs. To guarantee that the tenant can continue to make full use of its space, the landlord will frequently be required to maintain the remaining portions of the building, common areas, and grounds.

 

Repairs and maintenance plays an important role when it comes to commercial leasing issues.

5. PERMITTED USE

The types of businesses and other activities that can be carried out in the area are governed by these laws. Tenants must make sure that they are not overly restrictive in order to prevent changes in business operations and/or the lease assignment or subletting scenarios listed below. They are essential to the landlord in order to ensure that it can preserve the character and tenant-mix inside its property, and commercial leasing issues do not occur.

6. CASUALTY AND CONDEMNATION - COMMERCIAL LEASING ISSUES

When accidents or other acts of nature occur, both parties usually want the area to be repaired as soon as possible. However, during the restoration phase, tenants do not want to pay rent and may require a right to break the agreement, leading to commercial leasing issues. Even while eminent domain events are not all that common, they do occur, and the lease shouldn't be quiet about what occurs in those situations.

7. ASSIGNMENT AND SUBLEASE RIGHTS

Another example of the commercial leasing issues is the requirement for flexibility in dealing with future corporate operations is this one. For the tenant to be able to assign the lease in the case of upcoming entity-level transactions like a sale or merger, certain clauses normally need to be agreed. Furthermore, a tenant will desire the ability to rent all or a portion of the space.

In order to maintain an acceptable level of control over who uses the space and to assure the creditworthiness of the party responsible to pay rent for the space, the landlord typically places limitations on each of these rights which can lead to commercial leasing issues.

8. RELOCATION RIGHTS

Relocation rights are one of the commercial leasing issues. This is a frequent clause in business leases, and the landlord values it for its flexibility in potential future leasing of the property. A relocation, however, would be costly and could cause issues with the tenant's business. If the tenant is unable to completely eliminate this clause, it will need to negotiate steps such as prior notice, making sure the tenant receives similar space inside the building, and holding the landlord accountable for the expense of the move.

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