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A commercial property lease is a legal agreement between the property owner and the tenant to use the property for commercial purposes. While drafting a commercial property lease can be difficult, with the correct knowledge and planning, it will be helpful for both landlords and tenants. This blog post will thoroughly cover commercial property leasing, key terms, the leasing procedure, and suggestions for tenants and owners.
What is the Process of Commercial Property Leasing?
Below is a commercial property leasing process that will help fulfill your leasing requirements seamlessly.
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Assess Your Needs
It's necessary to evaluate your company's demands and decide the kind of area you need before you begin the property search. Consider your company's needs and variables like location, size, and cost. Once your demands have been established, look for houses that fit your requirements. Online, through real estate brokers, or by visiting property expos are various options to look for properties.
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Visit Properties
Arrange property tours to check if it fits your requirements. It will allow you to visit the location in person and decide whether it suits your business purpose.
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Think About the Rental Market
The rental market varies tremendously depending on where you live. Thus, checking the local rental market before signing a contract would be beneficial to get the property at competitive rates.
A flexible lease arrangement can be advantageous for both the landlord and the renter, so look for one. Moreover, you must always go for lease provisions that permit modifications as your company develops or evolves.
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Negotiate Terms
If you find a property that meets your needs, it is time to negotiate the lease agreement terms. It may include the rent amount, lease length, and responsibilities for maintenance and repairs.
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Sign the Lease Agreement
Once you have agreed with the landlord, sign the lease agreement and make any required security deposits.
Commercial Property Leasing Tips for Landlords
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Cautious Tenant Screening
Conduct rigorous credit and security checks on prospective tenants to ensure they are trustworthy and financially sound.
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State Responsibilities
The lease agreement should clearly state who is in charge of repairs and upkeep, as well as the obligations of both the landlord and the tenant.
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Set a Reasonable Rent
Decide on a price that covers your costs and gives you a return on your investment while also being competitive with other comparable properties in the neighborhood.
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Offer Incentives
Try providing incentives like rent-free intervals or tenant renovations to attract high-caliber tenants.
Commercial Property Leasing Tips for Tenants
Below are key steps a lessor must follow during a commercial property lease.
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Establish a Budget
Before looking for properties, decide on your monthly budget for rent and any supplemental costs like taxes and insurance.
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Negotiate the Terms
Be ready to negotiate the conditions of the lease agreement, such as the monthly rent and the length of the Lease.
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Consider the Setting
Your company's success depends on your building's setting. Consider elements like your target market's accessibility, visibility, and closeness.
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Properly Examine the Leasing Agreement
Verify that you comprehend every lease agreement clause before committing. Consider any clauses affecting your company, such as rent increases or use limitations. In addition, it is better to consult an attorney to ensure your ownership is safeguarded. If you have any questions about the leasing agreement, consult an attorney.
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Think About the Future
Make sure the leasing agreement allows for adaptability and expansion by considering your company's future needs. Before moving in, conduct a thorough inspection of the property to ensure all necessary repairs or renovations have been made and that it is in good shape.
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Maintain the Property
To maintain the property's value and avoid conflicts with the landlord, keep the house in good shape, and perform all necessary repairs. Consider purchasing insurance to guard your company against any potential obligations or losses.
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Review the Lease Regularly
Review the lease agreement regularly to ensure it still meets your needs and to address any issues that may arise.
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Negotiate the Prerequisites of the Lease
The owner and the tenant must agree when renting commercial property. Don't hesitate to negotiate its conditions to ensure the leasing agreement satisfies your wants and requirements. To secure a win-win arrangement for all parties, negotiate the rent, the length of the Lease, and other important aspects.
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Know Your Rights and Obligations
A popular commercial property leasing experience depends on being aware of your rights and obligations as a tenant. Make sure you know your responsibilities regarding rent payment, property upkeep, and usage limitations.
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Consider the Property Type
Different types of commercial properties have advantages and disadvantages. Consider the real estate kind that most closely matches your requirements, such as an office complex, a storefront, or a commercial warehouse.
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Include the Cost of Advancements
If you intend to make any changes to the property, include a provision in the lease agreement to cover the cost of those changes. By doing this, you can make sure the property is adequately cared for and enhanced over time.
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Examine the Landlord's Record Before Signing the Lease
Make sure the landlord has a solid reputation and a history of offering high-quality residences. A respected landlord is more likely to cooperate with you to make your leasing experience fruitful and effective.
Key Terms
- Total Lease: In a gross lease, the landlord is responsible for paying all property-related costs, such as taxes, security, and upkeep. The renter makes all monthly rent payments, and the landlord is responsible for all other costs.
- Net Lease : In a net lease, in contrast to the rent, the tenant is also responsible for part of the property's costs, such as insurance and property taxes.
- Triple Net Lease : In a triple net rental agreement, the tenant is in charge of covering all costs associated with the property, such as taxes, insurance, and upkeep.
- Escalation Clause : An escalation clause is a provision in a lease that permits rent to rise over time, generally according to a predetermined formula.
- Rentable Square Footage: The amount of floor space available by the tenant, including common spaces, is referred to as rentable square footage.
- Usable Square Footage: The actual square footage made accessible to the tenant for their usage, excluding shared areas, is referred to as usable square footage. Any alterations or additions done to the property to meet the unique demands of the renter are referred to as tenant improvements.
Conclusion
In a nutshell, renting out commercial property is a difficult and crucial choice for both tenants and owners. Both parties may ensure their partnership is fruitful and effective by understanding the major terms and the leasing procedure and adhering to best practices. Understanding the commercial property leasing process is crucial for success, whether you are a tenant searching for the ideal property or a landlord seeking the ideal renter.
And if you have questions regarding any part of the commercial leasing procedure, our attorneys at ContractsCounsel are there to help. Our team of experts can offer helpful counsel and direction to guarantee a good and lucrative commercial property leasing transaction.
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Meet some of our Commercial Property Lease Lawyers
Joshua B.
Josh Bernstein has been serving real estate and corporate transactional clients since 2002. His experience is varied, and he enjoys working on and puzzling out novel and complex corporate and real estate matters. Josh’s experience includes, among other things, the following: representation of public companies in connection with SEC reporting and compliance work (proxies, 10-K’s; 10-Q’s; 8-K’s, etc.); representation of public and private company securities issuances (including private placements, and other similar offerings); assistance in structuring and drafting joint ventures, both for investors and operating partners, and including both real estate and corporate ventures; handling public and private company mergers and acquisitions; and asset sales and dispositions; assisting clients, big and small, with real estate acquisitions, sales and financings; managing large-scale and multi-state real estate portfolio acquisitions, dispositions and financings; complex condominium creation, structuring and governance work, including: commercial condominiums, use of condominiums as a land planning tool, wholesale condominium property acquisitions and dispositions, and rehabilitating failed or faulty condominium legal structures to make ready for sale; development of restrictive covenants and owners’ association documents for master-planned communities; compliance with federal statutes governing real estate sale and development (including, without limitation, the Interstate Land Sales Full Disclosure Act, the Housing for Older Persons Act, and the Americans with Disabilities Act); representation of real estate lenders, for both improved and unimproved property, and including numerous construction financings secured by real estate; assistance with commercial leasing; from both the landlord and tenant side, and including condominium leasing; training residential home and condominium sales staff for compliance with applicable local and federal law; and workouts of all kinds. When he’s not busy lawyering, Josh may be found watching 80’s commercials, flying a single-engine plane, playing poker, or trying to be a good dad.
Joon H.
I work with private tech companies on entity formation, corporate governance, and commercial agreements. I was an in-house counsel for a unicorn fintech startup and am currently associated with a startup boutique while operating my solo practice. I received my JD from Berkeley Law, and served in the US Navy for 5 years as a combat linguist. I am fluent in Korean.
Mark P.
www.parachinilaw.com I represent a diverse mix in a vast array of specialties, including litigation, contracts, compliance, business and financial strategies, and emerging industries. Credit for this foundation of strength goes to those who taught me. Skilled professors and professionals fostered my powerful educational and professional background. Prior to law school, I earned dual Bachelor’s degrees in Business Administration & Accounting from Peru State College. I received a Master of Business Administration degree from Chadron State College. My ambitions did not stop there. While working full time as a Senior Accountant for the University of Missouri, Columbia, I achieved the lifelong goal of becoming a licensed Certified Public Accountant (CPA). Mizzo provided excellent opportunities and amazing experiences. Managing over $50M in government and private research funding was a gift. As a high ranking professional in the Department of Research, I was given priceless insight into the greatest scientific, journalistic, medical, and legal minds in the world. My passion for successful growth did not, and has not stopped. I graduated summa cum laude (top 3%) with a Doctorate in Law, emphasizing in urban, land use and environmental/toxic tort law from the University of Missouri, Kansas City. This success lead to invaluable experiences of serving as Hon. Brian C. Wimes' judicial clerk for the U.S. District Court for the W. D. of Missouri, as a staff editor/writer for UMKC Law Review, and as a litigation and transactional attorney with Lathrop GPM (fka Lathrop & Gage). My professional and personal network is expansive, with established relationships throughout the U.S. and overseas. Although I engage in legal practice all over the country, I maintain law licenses in Missouri, Kansas, and Nebraska. Federally, I hold licenses in the W.D. and E.D. of Missouri and the District of Nebraska. To offer extra value, efficiency, and options, I maintain a CPA license and am obtaining a real-estate brokerage license.
May 5, 2022
Cindy A.
Attorney that has worked in both litigation and transactional fields. Motivated and personable professional. Speaks fluent Spanish and very basic Portuguese.
May 5, 2022
Michael V.
Seven years experience reviewing and drafting corporate and transactional documents, including NDAs, LLC operating agreements, MSAs, employment agreements, etc.
May 6, 2022
Brittany S.
I am licensed in New York and New Jersey. I graduated with my J.D. from Touro University Law Center, Summa Cum Laude, in 2021. In 2018, I graduated from SUNY Farmingdale with a B.S. in Sport Management and a minor in Business Management. I have experience in real estate law and insurance defense, including employment law. Please note, I do not carry malpractice insurance.
May 24, 2022
Josh L.
Josh is a founding partner and the director of Art and Business Law for Twig, Trade, & Tribunal PLLC a local Fort Lauderdale law firm. His practice focuses on Art and Business law including art transactions, legal strategy, art leasing, due diligence, contract drafting, contract negotiations as well as other facets of Art Law including consulting for all market participants. He also advises clients regarding issues for Non-Fungible Tokens (NFTs) again focusing on contract drafting, strategic guidance, and other factors as it relates to art produced as NFTs having given numerous presentations on the subject.
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ContractsCounsel User
Getting ready to sign a lease on my first commercial business space
Location: Wisconsin
Turnaround: A week
Service: Contract Review
Doc Type: Commercial Lease
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Bid Range: $750 - $1,145
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121 Ludlow - Commercial Lease Review
Location: New York
Turnaround: A week
Service: Contract Review
Doc Type: Commercial Lease
Page Count: 27
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