Negotiating a Commercial Real Estate Lease, Commercial Real Estate, Gross lease vs net lease, commercial zoning laws

What to Consider When Negotiating a Commercial Real Estate Lease

A commercial real estate lease can make or break a young business. If the location turns out to be a flop, you don’t want to be stuck there for years. But if your company finds itself in a developing hub, you don’t want to worry about excessive rent increases. What about improvements? Legal protections? Zoning laws?

Don’t worry; you’re in good hands, well-seasoned in the art of commercial real estate negotiation. Through our years of experience, we’ve identified the following as key factors to consider when negotiating a commercial real estate lease.

 

Don’t be afraid to negotiate.

Contrary to many residential leases, a commercial real estate lease is often negotiated. From cost and length of the terms to the responsible party for utilities and possible renovation authorization. Be certain that any commercial lease you sign incorporates future business plans into the structure–you don’t want to return to the negotiating table with lost leverage down the road.

Most likely, the landlord or leasing agent you are dealing with is already expecting less than what they’ve initially asked. All you need to do is formulate a counter offer stating what your desires and expectations are. Here are some more tips for preparing a counter offer letter.

 

Clauses are your friend

Commercial real estate leases can appear as an intimidating pile of paperwork; filled with legal jargon that can both harm your attention span. So, if going it alone, remember: Certain clauses can be critical for your business’ success when negotiating a commercial real estate lease. Know your circumstances and keep an eye out for some useful commercial lease clauses, such as:

  • Exclusivity  
    • Can exclude your landlord from leasing additional space to potential competition.
  • Broad Usage
    • Allows your business to expand beyond its initial scope if the opportunity should arise.
  • Subletting or Assigning Lease
    • Permits you to sublease to a separate tenant or business if you need to move or, for some reason, your business is struggling.

 

Gross Lease Vs. Net Lease

There are two types of contracts to consider when negotiating for commercial real estate: Gross Lease and Net Lease. Essentially, a gross lease is all-encompassing, allowing you to pay a monthly total which includes all associated costs (rent, utilities, taxes, insurance, etc…). In contrast, a net lease

 

Know Your Zone

It is vital to research details about zoning laws for your business. Study the county’s zoning map and understand the zoning that pertains to your specific business needs. Here are a few to consider:

  • Commercial operations
  • Industrial
  • Agricultural
  • Historical
  • Residential
  • Aesthetic

In addition to constantly changing laws, commercial real estate leases are often filled with convoluted language, adding yet another hurdle to the dream of owning your own business. If you have questions or concerns about your commercial lease or need a free consultation, we are glad to help.

bankruptcy rights, landlord rights
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Your Landlord Rights Update for 2016

Beginning January 1, 2016, new laws regarding landlord-tenant rights will be put into place regarding termination of tenancy for domestic violence, the allowance of clotheslines or drying racks and the responsibility of mold.

Termination for domestic violence:

In order for a tenant (or household member residing on the property) to be terminated from the premises for domestic violence, the landlord was required to provide him/her with a 30-day written notice of termination. The notice was to be administered provided that a copy of a temporary restraining order or protective order or a copy of a peace officer’s report stating that a report alleging domestic violence or sexual assault has been filed. The law has been changed to require a notice of only 14 days for termination of tenancy with the above stated documentation.

Allowance of clothesline or drying rack:

Landlord approval of clotheslines or drying racks is now required provided that it (1) does not interfere with maintenance or the property, (2) does not create a health or safety hazard, (3) tenant seeks approval to attach to clothesline to a building prior to attachment, (4) clothesline or rack does not violate time/location restriction previously imposed by the landlord and (5) the tenant has received landlord’s approval for its use.

Mold:

The landlord is not obligated to repair mold dilapidation until he/she has received (actual) notice of dilapidation or if the condition exists due to the tenant interfering with the landlord’s attempt make necessary repairs prior to incident.

For further questions, concerns or clarification, please contact Peter C. Wittlin, esq.
Realtor Law Update- Landlords & Tenants