Providing Legal Services For More Than 125 Years

It Is Important To Have A Commercial Lease Reviewed Before Signing

On Behalf of | Aug 3, 2015 | Business Transactions

As a business owner when leasing commercial space it is important to have an attorney assist you in reviewing and negotiating the lease. Some of the terms of a commercial lease are generally negotiable. If there is more than a fixed monthly rent to pay it is important what that additional rent will be. For example, it is not uncommon a landlord to require you to pay your portion of the real estate taxes for the building or mall and plaza along with your portion of certain charges to maintain the area you share with other tenants including the outside portions of the buildings and parking lot; often referred to as common area maintenance or CAM charges. Obtaining from the landlord the portion of real estate, CAM, and any other charges for that space for the prior year will give you an idea of what rent you would be likely to pay in addition to your fixed monthly rent which is also often called minimum rent. Depending on the deal you have with the landlord, the landlord may require you to provide a percentage rent also on your revenue. This may be more likely given if the landlord considers your business being a valuable addition to the property. For example, a small cafeteria restaurant or health club in a large commercial office building may be considered an attractive feature for that building and the landlord may negotiate a deal with the tenant for a smaller fixed monthly rent and percentage of revenue rent share in the success of that tenant based upon the volume of its sales.

Any restrictions of the assignment of the lease are also important. Some landlords will attempt to put a provision into a lease that if the tenant requests to assign the lease, the landlord can, not only refuse the assignment but also terminate your lease even though you may still have several years left in the term of the lease. Such a proposed provision by a landlord is one that is likely to be negotiated out of the lease if you have any attorney that requests such a revision.

In having reviewed draft leases for many years, I have seen some as small as two pages yet many up to 40 pages. Even some of the 2-page draft leases have vague language and if signed as is could lead to a later dispute between the tenant and the landlord. Fixing that before signing the lease assists both the landlord and tenant in knowing what they can and cannot do in the future.

J. Daniel Marr is a Director and Shareholder at Hamblett & Kerrigan, P.A. His legal practice includes counseling businesses and individuals on a variety of legal issues and advocating on their behalf. Attorney Marr is licensed and practices in both New Hampshire and Massachusetts. Attorney Marr can be reached at [email protected].