Commercial Landlord

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Signing a commercial lease can be a frightening experience for the small business owner.  Many of the terms are unfamiliar.  The owner may be unsure of her right to negotiate, since she may not know what a fair rent in the neighborhood is.  And finally, the amount of money at stake can be exceedingly high – often a business person’s life savings and family welfare are at stake. 

People tend to empathize with the tenant more than with the landlord.  The landlord is seen as the person sitting high atop a skyscraper, behind a big desk, with high stacks of money teetering on the edges.  As the landlord looks out over the cityscape, he rubs his hands together in satisfaction over a tenant eviction. 

Commercial Landlords rent property for the purpose of allowing others to operate a business. Such businesses are considered tenants and are held to the terms of a commercial lease. Although residential and commercial landlords have similar responsibilities, commercial landlords deal with particular problems their residential counterparts will not encounter.   

How Does the Commercial Landlord Address the Needs of A Business Tenant?

Traditionally, business tenants had less protection than residential tenants as courts believed that business tenants were in a better bargaining position than their residential counterparts. However, just as a residential landlord must ensure that a residential property is livable, commercial landlords must ensure that the property they rent to business tenants are suitable for operations.

This includes making necessary repairs to structural defects, complying with building regulations, ensuring that the business is not being disrupted and otherwise upholding the terms of the lease.

Why does a Tenant Want Exclusive Use of the Property?

Exclusive use means that the tenant wants to ensure that similar businesses won’t also rent space close to his or her location. If a competitor opens in the same building as the business tenant, then profits will likely fall. Asking for a non-compete clause in the lease is a reasonable way to prevent this from happening.

From the commercial landlord’s point of view, however, limiting the type of tenants who rent the property might cut into future commerce, especially if more than one business tenant asks for exclusive use of the property. The landlord could consider certain compensations in exchange for exclusive use, such as higher rent. Such details are between the landlord and the tenant, although both should put this down in the lease before starting the relationship.

What Happens If the Tenant Sells or Transfers His Business To Another?

Business ownership often changes several times over a business’s lifespan. If the tenant sells his business to another, either ensure that the old lease is enforceable or create a new lease and treat the new owner as a new tenant. The former is usually easier if the lease was with the business and not with the owner. 

The tenant may also try to sublease the property to another. Although such assignments of property are between the tenant and the landlord, the commercial landlord can reserve the right to express his or her approval before such a sublease can be utilized. An approval clause in the commercial lease can protect the interests of the commercial landlord if he or she opposes a sublease.

What Happens If the Business is Unable to Pay Rent?

Commercial tenants unable to pay rent are treated similarly to residential tenants. In both cases, the tenant is given a three-day notice to pay or quit the premises. If the tenant has not moved out without the time period, then the landlord may file eviction with the court to obtain an eviction order for the police department.

The difference between the residential tenant being threatened with eviction and the commercial tenant being threatened with eviction is that there are typically less safeguards in place for the commercial tenant. Most courts automatically assume that residential landlords have a right to a habitable property. Commercial tenants don’t have the same luxury unless the lease or the state law specifically states otherwise.

Do I Need a Lawyer If I Have A Dispute With My Tenant or Commercial Landlord?

An experienced business lawyer can help you resolve any disputes about commercial renting.

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Last Modified: 05-08-2012 10:01 AM PDT

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