Your Guide to Reviewing Commercial Lease Agreements

Your Guide to Reviewing Commercial Lease Agreements

It's alarming to know that Charlotte's commercial office delinquency rate is 25% higher than the national average.

With this in mind, reviewing a commercial lease agreement is more important than ever. Businesses deserve to have ideal commercial spaces that uplift them rather than slow them down.

What do landlords and businesses have to learn about commercial lease agreements? Read on for the full commercial lease agreement guide.

Understanding the Basics of a Commercial Lease

This contract outlines the terms and conditions under which a business can occupy a commercial space. It's essential to have a solid grasp of the lease's fundamental components before you review a lease. Consider the following:

  • Rent details
  • Lease term
  • Maintenance fees
  • Property taxes
  • Insurance premiums
  • Any extra costs

Conducting Due Diligence

This involves examining the lease agreement and gathering essential information about the property and the landlord. Key elements of due diligence include:

Property Inspection

Visiting and inspecting the property to ensure it meets your business needs is vital. Assess its condition to identify any pre-existing issues.

Lease History

Inquire about the lease's history. This should include any previous breaches or disputes between the landlord and other tenants.

Financial Verification

Ensure that the financial terms in the lease are accurate and in line with your budget. Verify the rent, security deposit, and any other financial obligations.

Scrutinizing Lease Clauses

The heart of any commercial lease agreement lies in its clauses. These dictate the rights, responsibilities, and restrictions of both parties. Here are some critical clauses to focus on during your review:

Examine rent escalation clauses to understand how and when your rent may increase and whether it aligns with your budget projections. Clarify the responsibilities for maintenance and repairs to determine who bears the costs and how disputes are resolved.

Review the lease term, including any renewal options, and ensure it aligns with your business plans. Ensure the use clause permits your intended business activities and doesn't restrict future expansion or changes in your business model.

Potential Breach of Lease Issues

One of the most critical aspects of reviewing a commercial lease agreement is understanding the consequences of a potential breach. Common examples of lease breaches include the following:

  • Failure to pay rent
  • Unauthorized alterations to the property
  • Violating use clauses

It's essential to be aware of the remedies and consequences associated with a breach of lease. In the event of a significant breach, the landlord may have the right to end the lease and start eviction proceedings. The lease may also outline financial penalties for breaches.

Many leases provide a grace period in which the tenant can rectify the breach before more severe actions are taken. Understand how disputes over lease breaches will be resolved, whether through arbitration, mediation, or legal action.

Don't Rush Into Commercial Lease Agreements

Reviewing commercial lease agreements is a vital step in securing a property for your business. By following these commercial lease agreement tricks, you can protect your company.

Are you looking for incredible commercial spaces in the Charlotte, NC, area with fair lease agreements? Contact PMI Amazing Spaces to chat with our wonderful team about our available commercial properties.