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Questions to ask yourself before you sign a commercial lease

Financial Advice

BUSINESS MANAGEMENT

Articles and research about managing and owning a business

Ask yourself these questions before you sign a commercial lease

Financial Advice

BUSINESS MANAGEMENT

Articles and research about managing and owning a business

Business Lease Concerns

Published October 27, 2014 | Updated November 12, 2014

by Kathy Tremmel, Business Attorney

Renting commercial space is a big responsibility. You want to make sure the lease terms fit your business' needs and will accommodate changes to your business as it grows or contracts.

Typical issues business owners face:

  • Being able to assign the current lease to a buyer when you sell your business
  • Being responsible for major repairs
  • Inadequate parking
  • Disruptive noise or odors from adjacent tenants

Here are several important issues you should consider before you sign a lease.

Location. Where is the space located? Does the space accommodate your customers? Does it fit your business’s culture?

Space. What exactly are you renting? How is the space measured? Does your space include common area?

Rent. How much is the rent? How is it calculated? How are rent increases handled? How much is the security deposit and when will it be returned?

Other Costs. What additional costs do you need to pay, such as insurance, property taxes, maintenance, utilities and common area costs?

Term. What is the lease term? When does the lease start and end? Can you renew the lease? Will you have the option to expand your space? Can you terminate the lease?

Operating Hours. Are there requirements that your business is open certain days and for certain times?

Improvements. Will you need to make modifications to the physical space? If so will you be able to make these changes? What are the build out requirements and specifications? What fixtures do you need? Who pays for these items and who owns them after the lease ends?

Signs. What are the specifications for any signs? Where can you put signs?

Parking. Is there adequate parking for your business? Are there designated spaces?

Repairs & Maintenance. Who is responsible for maintain and repairing the premises, including the heating and air conditioning systems? Are there any manufacture’s warranties that will be passed on to you? How old is the equipment?

Right to Quiet Employment. What happens if there are issues with odors, noises or other reasons why your quiet enjoyment of the premises is disrupted?

Assignment & Subleases. Can you assign or sublease to another tenant? Will changes in your business entity ownership trigger an assignment? If you sell your business, what are the fees for transferring the lease to the buyer? If you are selling your business and these provisions are not spelled out, the landlord may seize this opportunity to renegotiate rent with your buyer.

Termination. How can the lease be terminated? What are the notice requirements? Are there penalties for early termination?

Landlord Subordinate Security Interest. Normally landlords require you grant them a security interest in your business’s assets to ensure payment of rent. Will the landlord subordinate these rights in the event you need to get financing?

Insurance. What types and amounts of insurance are you required to carry?

Exclusive Use. Does the lease prohibit the landlord from renting space in the same complex to your competitors?

Personal Guarantees. Many commercial leases require the business owners be personally liable for the tenant’s obligations.

Article and information is courtesy of Kathy Tremmel, Business Attorney at Tremmel Law, PLLC. Amplify Credit Union does not endorse or guarantee the perspectives, the advice, the users, the businesses, or the products or services sold by any users or businesses that appear in this article.




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