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Commercial Lease Review

Updated: March 7, 2024
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What is a Commercial Lease Review?

A commercial lease review is when a potential tenant reviews the commercial lease agreement provided to them by a potential landlord to sign. Tenants (and lawyers representing the tenant) want to clearly understand the terms of the tenancy and look for any potential issues within the lease agreement that may be problematic.

It is important to have your commercial lease agreement reviewed by a real estate lawyer for the below reasons:

  • Clarity of Understand. As a tenant and likely business owners, it is extremely important to understand the terms of that govern one of your biggest expenses – real estate. You want to make sure you know all of the key terms and what they mean.
  • Size of Transaction. Given commercial lease terms can sometimes be for 5-10 years, the size of the investment is likely significant. For example, if you sign up for a 5-year lease at $5,000 per month, the lease will represent a $300,000 business expense. It is worth making a small investment to make sure you are best protected when signing up for a substantial cost for your business.
  • Hidden Costs. In most leases, there will be terms that outline who pays for repairs and maintenance. You want to make sure you understand all financial liability you will have as a tenant.
  • Restrictions. Some businesses may want to renovate or alter the property. Understanding what is allowed and what isn’t allowed is important as it should align with your business plan.
  • Negotiation. A commercial real estate lawyer will understand certain terms that you can likely negotiate with your landlord, which may put your business in a better position to succeed.

See Commercial Lease Pricing by State

Types of Lawyers You Want for a Commercial Lease Review

Real estate attorneys typically handle commercial lease reviews. As a result, they are well-versed in landlord-tenant law. They can help you identify clauses that may contain poor wording or be unacceptable for your business.

Commercial real estate lawyers can advise on what lease type would best suit your needs and even review the lease to ensure it contains all of the necessary clauses for your operation.

Landlords may try to slip clauses into a commercial lease agreement that are aimed in their favor, not yours. For example, some landlords will even include clauses that allow them to cancel a lease if economic conditions change.

Tenants might not notice these additions, but lawyers usually point out this issue during lease review and advise you on how to negotiate it.

How Does a Commercial Lease Review Work?

During a commercial lease review, a lawyer reviews your lease agreement to ensure it is in your best interest. This can be important because if any clauses are worded poorly, it could put you in an unusually high-risk position.

A lawyer for a lease agreement can:

  • Review and explain the lease to you
  • Review and redline the lease for you
  • Review, redline, and negotiate the lease terms for you

Depending on how long the landlord has been negotiating commercial leases, they can take anywhere from ten days to three months or longer to complete. Contact a business real estate attorney today if you need assistance finding affordable office space or negotiating a commercial lease form.

Here is an article that reviews how a commercial lease agreement works.

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Key Terms to Review in a Commercial Lease Agreement

If you are a commercial tenant, there are certain terms that you should review before signing. These include:

  • Clearly Defined Location Description: Some leases are vague about your renting location. Look to see that size and restrictions on the use of property are made clear.
  • Use Clause: This will outline how the tenant may utilize the leased commercial space and will need to align with your business goals.
  • Maintenance and Repairs: This clause will spell out who is responsible for maintenance and repairs of the property. This is important to understand from a financial perspective.
  • Alterations: If you want to renovate or alter the property, make sure you are aware of what alterations are permitted (if any), so that they align with your business plan.
  • Rent Payment: Understand the rent amount, frequency of payments, if there are any planned increases, and any other terms related to your financial liability.
  • Insurance Requirements: Many leases require insurance on both the landlord and tenant’s parts. Check to see that the amount of coverage requested by the landlord is reasonable, and make sure it is clarified in the lease. Again, a lawyer would be helpful if this discussion leads to negotiations.
  • Renewal Terms: You must ensure the renewal terms align with your business’s growth plan. Check to see how and when the renewal is triggered, and ensure you know any notification requirements to renew.
  • Assignment Options: A landlord usually wants the contracting party to be the tenant. However, if your business’s needs change in the future, you need to know if you have the option to sublet or assign the lease to a third party. Here is another opportunity to lean on an expert to learn how to negotiate a commercial lease.
  • Indemnity: It is common for landlords to include indemnity terms in the lease. Make sure, if there is an indemnity provision, that it is not on unreasonable terms that clearly favor the landlord.
  • Termination/Holdovers: Check to see if there are penalties for early termination of the lease or holdover periods.

Here is an article that helps you understand key terms in a commercial lease agreement.

Why Is It Important for an Attorney to Review Your Commercial Lease

If you are a commercial tenant, it is important to have an attorney review your commercial space lease before signing.

The landlord may try to include clauses that put you in an unusually high-risk position or are not favorable for your business type. A real estate attorney can ensure that these clauses are removed and the language is clear, so you know what you’re getting into before signing the contract.

In addition, they will examine the clauses to determine if they would be too burdensome for your business or will increase the risk.

For example, clauses on early termination of the lease could prevent you from moving out quickly when necessary. It would be in your best interest to also talk to your real estate attorney about any other stipulations you want to include and how those will affect them.

Here is an article on ways a lawyer can help navigate commercial lease negotiations.

How Much Does It Cost to Review a Commercial Lease?

The cost to review a commercial lease can vary on the agreement’s length and complexity. Other factors that impact legal fees are the lawyer you hire. Lawyers with greater experience will charge more and lawyers in more expensive markets have higher rates.

According to ContractsCounsel’s pricing data, the average cost to review a commercial lease is $690.00 [1].

Below is some more legal fee data to explore:

Average Cost Data from Lawyers on ContractsCounsel

All Commercial Lease Projects:
$710.00
Drafting a Commercial Lease:
$830.00
Reviewing a Commercial Lease:
$690.00

Based on 103 recent projects completed by lawyers on ContractsCounsel.

Last updated: 9 April, 2024

How Do Lawyers Charge for a Commercial Lease Review?

A lawyer can review your commercial lease for a flat fee or an hourly rate.

  • Flat Fee Commercial Lease Review: If your business requires ongoing legal advice on other matters, then a flat fee may be better for you because there are no surprise fees after the initial consultation.
  • Hourly Rate Commercial Lease Review: If you use a lawyer to review your commercial lease, they will likely charge you an hourly rate. This means you pay for every hour they spend reviewing your contract.

A commercial lease review is important to ensure you are protected. The information in this article can help you understand what you need when reviewing a commercial lease and guide you on what to expect if you hire a lawyer.

Hiring an experienced real estate lawyer is your best bet to ensure your Commercial Lease is correct, concise, and serves your needs.

Post a project in ContractsCounsel’s marketplace to receive flat fee bids from lawyers for your project. All lawyers have been vetted by our team and peer-reviewed by our customers for you to explore before hiring.

References

  1. ^ Based on real pricing data from ContractsCounsel's marketplace. Last updated 9 April, 2024.

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