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What considerations should you have for a commercial lease?

Signing a lease on a commercial property for your business is very different from signing a lease on a residential rental property. Sure, you're agreeing to pay a certain amount of money each month or designated period, and the landlord is agreeing to let you occupy the space. But the services you might request of a commercial landlord -- and the requirements they might have of you in return -- are different.

Some common things to consider when reviewing a commercial lease include the requirement for your personal guarantee, fees associated with the lease, the type of lease you are signing, and how expenses are divided. Depending on how your business is set up, how long you've been in business, and the landlord's preferences, he or she might require that you personally guarantee a lease. If you sign a personal guarantee, the landlord might use your personal credit to make a decision about whether to lease property to you. He or she might also seek payment for the lease from you if the business defaults for any reason.

Next, you should always understand the costs associated with any business agreement. Some commercial lease agreements might include various fees for services or amenities offered in the space. In other agreements, you are paying for a certain amount of space. Double check the value of your lease by measuring your space yourself.

The type of lease you sign plays a role in your expenses over time. Options include net leases, percentage leases, and gross leases. Understanding which option is best for you can be difficult, which is one reason it helps to seek experienced advice before committing to a lease.

Finally, you should negotiate favorable expense arrangements. Who will pay maintenance fees? Is your business responsible for certain repair costs or lawn care? It's convenient to have these handled by the landlord, but it's important to have such matters spelled out in the lease.

Source: Fit Small Business, "How To Lease Commercial Real Estate," David Waring, accessed Dec. 31, 2015

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L. Scott Karlin

L. Scott Karlin

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David E. Karlin

David E. Karlin

David E. Karlin is a California attorney with a primary focus on business and real estate, including law and legal issues...

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Michael J. Karlin

Michael J. Karlin

Michael J. Karlin is a Southern California based attorney whose practice primarily focuses on Entertainment Law. Michael began...

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