Are you contemplating leasing office or retail space for your small business?
The terms of your lease can significantly impact the success or failure of your business. It is imperative to consider several crucial provisions before finalizing the lease agreement.
Leases must generally be in writing and signed by the party against whom enforcement is sought. The lease should explicitly delineate certain terms of importance, including the following:
Leased Premises: The lease must specify the exact space being rented, including common areas such as hallways, restrooms, stairs, and elevators. The square footage and the method of measurement should be clearly stated.
Property Modifications: If improvements or modifications to the leased space are necessary for your business operations, these should be detailed in the lease. The lease should also indicate who will bear the cost of these improvements and who will own them upon lease termination. Additionally, if modifications are required for compliance with the Americans with Disabilities Act, the lease should specify the responsible party for implementing and financing these modifications.
Lease Term: While a longer lease term of five or ten years may initially seem advantageous, it also binds you to a space that your business may outgrow or find unsuitable. For many businesses, particularly new ones, a shorter lease term with an option to renew is more beneficial, providing greater flexibility and reduced financial risk. However, if substantial improvements are planned, the pros and cons of a long-term lease should be carefully weighed to recoup the investment.
Rent: Ensure that your business can afford the monthly rent stipulated in the lease. The lease should specify the rent amount, payment method, and inclusions such as taxes, utilities, insurance, maintenance, and water. It is also important to understand any escalation clauses that allow the landlord to increase the rent at specific intervals and verify their acceptability for your business.
Use of Premises: The lease should include terms specifying the permitted use of the commercial space for your intended business operations. Ensure there are no restrictions that could impede your business. Provisions for displaying signs, using the sidewalk, or playing music should also be included if applicable.
Competition: If your business could be adversely affected by nearby competing businesses, include a provision restricting the landlord from leasing space to similar businesses in the surrounding area.
Subletting or Assignment: A clause allowing subletting or assignment of the lease provides flexibility, enabling you to sublet part or all of the space to another tenant or include the lease in a future business sale.
Termination: An early termination clause specifies conditions under which the lease can be terminated early by either party. This clause is beneficial, especially for longer-term leases, as it allows you to avoid penalties or litigation if you need to close your business.
Contact Davis Law Group
As business attorneys, we understand the critical role of your commercial lease in your business’s success. If you are considering moving into a new commercial space, we would be happy to help you negotiate favorable lease terms for your business. Please contact us to schedule a consultation.
8 Essential Provisions for Small Businesses in Commercial Leases
Are you contemplating leasing office or retail space for your small business?
The terms of your lease can significantly impact the success or failure of your business. It is imperative to consider several crucial provisions before finalizing the lease agreement.
Leases must generally be in writing and signed by the party against whom enforcement is sought. The lease should explicitly delineate certain terms of importance, including the following:
Contact Davis Law Group
As business attorneys, we understand the critical role of your commercial lease in your business’s success. If you are considering moving into a new commercial space, we would be happy to help you negotiate favorable lease terms for your business. Please contact us to schedule a consultation.
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