Leasing Commercial – “For Lease” is Only the Beginning: A Guide to Understanding Commercial Lease Agreements

All leases are not created equal. If you’re considering leasing a commercial space, don’t assume that the “for lease” signs are all you need to worry about. Signing a commercial lease agreement in order to house your business or office is critical business decision that can make or break the success of your endeavor. Before you sign a commercial lease agreement, it's important to understand exactly what's in the agreement, some important terms that should be included, and how the commercial lease differs legally from a residential lease. Read on for more information about commercial leases and how to make the most of your decision, beyond the commercial space “for lease” phase and on to signing the actual agreement.

Understanding a Commercial Lease Agreement

The first important difference to understand is that while tenants under residential lease agreements often enjoy the protection of a series of state and local laws designed to safeguard the tenant against landlord abuses, a commercial lease agreement, for better or for worse, is unlikely to include any such rules for tenant protection. Privacy laws, for example, which prevent the landlord from entering the property without 24 hours’ notice, apply to most residential leases but not commercial ones.

The lease agreement for a commercial property also does not generally follow a specific structure like most residential leases do. A commercial lease is a very flexible arrangement, and if you’re not prepared to negotiate the terms up front, you may be in for a surprise. Commercial leases involve all kinds of back and forth between the landlord and renter until satisfactory terms are reached. Unlike a rental lease, they are not typically cut and dried.

Be aware, too, that a commercial lease property arrangement will probably be for a much longer term than most residential leases. While there are exceptions to the rule, residential leases, in most cases, will last for one to three years, while a commercial lease can easily be signed for ten years or even longer if both sides desire such an arrangement. Obviously, you can negotiate these terms – as mentioned above, it’s pretty much all up for negotiation – but be prepared for the commercial lease to be a more binding, long-term agreement than you might have expected.

Know Before You Sign

Considering, then, that a commercial lease agreement for the most part will be long-term and filled with a number of negotiable terms and factors, it’s extremely important to know what you’re signing before you sign it. Going into a commercial lease agreement without having a full grasp of what the paperwork says, or without understanding fully how to negotiate with the landlord, is a recipe for disaster – or at the very least, a great way to lose money. You absolutely need to be prepared before you sign such a lease.

For example, you’ll want to understand whether your lease has:

• Provisions restricting the landlord from renting to competitors or those who might hurt your business in some way.
• Limits or restrictions on your ability to change the property to suit your needs.
• The option to renew after the lease term expires so you don’t have to move your business.

This is just a small sampling of the clauses that may find their way into commercial leases that could have a major impact on whether the space is right for your business or not. Asking questions of your landlord, or getting an experienced real estate attorney to help you interpret the provisions of your commercial lease agreement before you sign, are the best ways to avoid a catastrophic lease commitment.

Getting Help With Your Commercial Lease Uncertainties

If you’re unable to research the information yourself, then you could save money in the long run by paying a real estate lawyer now to go over the lease with you and ensure that it doesn’t contain any unfavorable terms that could hurt your business and cost you money later. The key is to move forward on your commercial lease agreement with as much information as possible on your side. That’s the best way to ensure you’re signing into a property with a commercial lease agreement that works for you as well as for your business.