Commercial Leases 101: Rent

After you've found the perfect location for your business, it's time to negotiate the commercial lease agreement. Though it may sound strange, you can negotiate the terms of a commercial lease. Here are some common things you can work out with the landlord before signing the agreement.

Negotiable rental terms of a commercial lease agreement

Commercial lease agreements have components that relate to the responsibilities of the property owner and the tenant ranging from rent to maintenance of the property and grounds. Each state and municipality has its own statutes regulating commercial real estate that both the landlord and tenant must follow.

You'll want to be aware of the typical statutes that are valid and enforceable once you sign the agreement. To find the statutes in your state, simply search for "commercial lease statutes" or contact a local commercial lease lawyer for assistance.

Types of leases affecting rent

There are a variety of arrangements between a landlord or property owner and a tenant to cover costs associated with the rent. In the case of a full-service lease, the landlord takes care of taxes, insurance, utilities and operating costs while the tenant pays rent. Alternatively, a net lease splits up the property costs in the following ways:

• Triple-net lease: The tenant is responsible for rent and operating expenses of the building. The rent is typically lower than it would be for a full-service lease.
• Double-net lease: The landlord covers the maintenance costs while the insurance, taxes and utilities are borne by the tenant.
• Single-net lease: The rent and utilities are the tenant's responsibility and the insurance, maintenance and taxes are paid by the property owner.

Here are three common components of a commercial lease relating to rent:

Subleasing

A commercial lease will document whether or not the tenant is permitted to sublease to another party and effectively stop paying rent. You'll need the landlord's consent to sublease. However, you can negotiate for exceptions that allow you to sublease a percentage of the building without landlord approval.

Holdover rent

In cases when a tenant overstays their rental term, the property owner could charge a tenant upwards of 250% of your rent on a month-to-month basis. Before you sign a lease, negotiating the percentage increase would save you thousands of dollars in the future. Alternatively, if you occupy the premises beyond your lease term, your landlord might evict you.

Rent adjustment

There are provisions in a commercial lease for increasing or decreasing a tenant's rent that ought to be worked out before you sign any agreement:

• Stipulate a 30-day timeframe for paying rental increases.
• Ask for the option to challenge the property assessor's determination.
• Agree on a refund in the event of a devaluation of property for increases paid.

If you want to learn more about your commercial lease, The Law Offices of Donald Hudspeth Law P.C. can help you get the most value out of your commercial lease.

Categorised in: Starting a Business in Arizona

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