A commercial lease is a type of contract between a landlord and a business to use the property for the purpose of running the business from that property. Businesses typically pay the landlord rent in exchange for usage of the property. Entering into a commercial lease agreement as a landlord or tenant is an enormous undertaking that can make or break your business. Whether you are a landlord or a tenant, you will need to negotiate the terms of a commercial lease. It is important that you understand the lease provisions before signing.
Commercial leases are commonly differentiated by the type of business using the property:
Residential leases are designed for the enjoyment of a tenant’s personal time and space. Commercial leases, on the other hand, are crafted with the goal of running and maintaining a business. Although the two types of leases will share some aspects in common, such as rent and security deposits, commercial leases are different from residential leases in the following ways (please note that this list is not exhaustive):
There are certain provisions that every lease must contain. These include:
Your lease should state who is responsible to pay for utilities, insurance and property taxes. Sometimes these costs are included in the rent. What is the duty to repair in a commercial lease and how can that affect my lease? A major defect at your place of business could have an adverse impact on your ability to consuct business - typically most commercial leases offer little protection to the leesee.
The lease should also include provisions that describe the property, including:
You should also check for provisions relating to how the property can be used in the future, including:
Landlords do not want to evict tenants: eviction proceedings are expensive and frustratingly sluggish.
Therefore, it is important for a landlord to recognize the first signs of payment delinquency. The tenant may approach the landlord before any nonpayment, asking for a reduction in rent. A tenant may pay a fraction of the rent, and then promise to pay the rest when an anticipated “big deal” comes through. These signs should raise suspicion in the mind of a discerning landlord. A landlord must determine the probability of payment, based on business factors such as profitability and financial indicators.
The next step is serving a 3-day notice, which states the amount due and gives the tenant 3 days in which to pay this amount before eviction commences. In California for example, a landlord can choose between stating an exact amount or an estimate. If choosing the latter, a landlord can overestimate the rent and still evict, but the judge can adjust the rent to a reasonable amount.
If the business still does not pay the rent, a landlord is left with no choice but to file an “unlawful detainer” to start the eviction lawsuit.
Commercial leases are very complex and often difficult to comprehend. An experienced real property lawyer can help you understand all the provisions of your lease. A real property lawyer can also make sure that your commercial lease doesn’t include any unfair or illegal provisions.
Last Modified: 04-14-2015 12:01 PM PDTLaw Library Disclaimer
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