WHY YOU NEED AN ATTORNEY TO REVIEW A COMMERCIAL LEASE AGREEMENT
April 30, 2021
One of the most important things a Saint Petersburg area business owner needs to do is choose a location for their business. Often a business owner will lease space for their business and the commercial lease agreement they sign is extremely important. There are several reasons why a business owner should have this essential contract reviewed by an attorney.
Before a commercial lease agreement is drafted, there are usually important points that have been agreed to between the tenant and landlord. These include the monthly rent, square footage, terms, security deposits, etc. These terms should be accurately written down in either a letter of intent or a term sheet put together by the deal makers, whether brokers or representatives of the landlord and tenant. An attorney can then draft (usually the landlord’s attorney) or review (usually the tenant’s attorney) the lease document to make sure everything is correct and reflects the business deal.
Common Area Maintenance Fees
Commercial tenants are usually required to share the operating expenses of the building and property. Tenants may share the cost of security, parking lot maintenance, electricity for common areas, etc. These fees can be expensive if the owner does not properly limit or apportion the costs passed through to the specific tenant. A tenant may want their attorney to insist that these fees be dependent on the percentage of total available square footage available for rent, rather than the total space rented, and limited to non-capital expenses. Also, a cap on annual increases may be negotiated.
Use of Space
An attorney should review a lease for how a tenant is allowed to use the space they are renting and what commercial activities they are permitted to engage in. In a retail lease, they may also want to negotiate for an exclusive use clause, where the landlord would not allow another business that does the same thing to occupy the same shopping center.
A tenant may want to have a clause allowing them to terminate the lease before the term expires. A provision in a retail lease agreement can provide that if sales do not reach a certain level by a specified date the lease can be terminated.
Assignment and Subletting
A tenant may want the flexibility to assign or sublet the space leased, in order to exit the business location or be relieved from the expense, while a landlord may want to strictly control who is occupying the space. This is often a heavily negotiated clause in commercial leases, which are generally long-term financial obligations.
Negotiate More Favorable Terms
An attorney can help negotiate better terms and conditions for their client so that they can be in a more favorable position from day one. This may require consulting an experienced commercial real estate attorney at the letter of intent/term sheet phase before the parties have agreed on the major deal points. The further along the deal timeline, the harder it will be to modify or introduce new deal points.