Commercial Real-Estate Law From the Tenant's Perspective
In real estate law, the legal term for the owner of property is “landlord,” and for the renter is “tenant.”
In residential law, there are special laws that defend the legal rights of occupants. Residents have the right to a safe, clean, and healthy home. Commercial tenants, on the other hand, are businesses that are assumed to be knowledgeable and sophisticated about the business law. Therefore, businesses are not given the protections extended to individuals.
However, many business owners are just that: business people, not lawyers. They evaluate the location of the property to see if it would attract customers. They look around the inside of the building to see if the space is well-designed for their purposes, be that an office or a restaurant. Everything seems fine, and they make the decision right then and there to start their business.
When they sit down with the landlord’s real estate agent, they suddenly get nervous. The real estate agent spends much of the time in checking to see if the business “qualifies” as an acceptable tenant. Then the agent slides the lease over begrudgingly, still apparently doubtful of the business’s acceptability but willing to make a great leap of faith. The agent implies from body language that the business person sign quickly, and that this is the “standard form” that everyone uses.
The business person may have no idea if the rent quoted is truly a good deal for that area. It may be difficult to find out what all of the neighboring businesses are paying. The business person may not understand about indemnification of liability, waiver of security deposit statutes, subrogation of insurance, maintenance and tax obligations, signage, restrictions on use, rent abatement, assignments and subleases, etc.
In the end, the business person often signs and initials the lease, just trusting that the landlord will handle future problems reasonably, and focusing on the business problems at hand. Because problems don’t always get worked out reasonably, a business owner should hire a real estate agent or attorney just like the landlord has. Many business owners do not know that an agent will be inexpensive, because she or he gets paid a fraction of the landlord’s agent’s commission. An agent is an expert in leases, and will look out for the best interest of the business tenant.
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Last Modified: 09-16-2011 01:38 PM PDT
