“Creating Best Rental Terms On Commercial For Lease” written by Mike Marko
Looking for tips on creating the best rental terms on a commercial for lease property agreement?
Having good and strong terms makes a lease effective. It can also help earn a potential tenant’s interest and trust.
However, creating the best rental terms isn’t easy. You need experience and patience — or in the absence of those, serious professional assistance.
Fortunately for you, I’m here to help by giving you that professional assistance.
Now, how do we start on creating the best rental terms?
Today, we will tackle some helpful tips and guidelines you can follow when creating your commercial for lease property agreement.
Commercial for Lease Tips and Guidelines
There are a lot of things to take into account when creating a commercial for lease property agreement.
For example, when negotiating a commercial for lease property agreement, you need to be extra careful in covering all possible costs.
You also have to make adjustments to allow the business to grow and thrive from the lease.
Remember, commercial leases are best when it is a win-win for both the lessee and the lessor.
Now, to thoroughly guide you, here are some commercial for lease property agreement tips and guidelines.
Defining a Commercial Lease Agreement
The first things you’ll negotiate is the term (length, or lease period) and rent of your commercial property lease. Normally a commercial lease is a longer-term lease than a residential one.
Bear in mind that 1-2 year lease terms with the option to renew are best for small businesses.
With that said, you must schedule a consultation with a real estate lawyer. This assures you that you’re covering all your bases for your commercial for lease property agreement.
Figure out Your Expenses
Prior to finalizing a commercial for lease property agreement, you need to understand your property needs and all costs associated with maintaining those needs.
Since you’ll be paying the lease every month, you need to find out what expenses you’ll be paying for your property to be leased.
The ongoing costs of utilities will more than likely be your responsibility. Make sure you know exactly how the amount you owe is measured.
Commercial property owners also include ‘hidden fees’ in the commercial for lease property agreement. You can also include maintenance fees and Common Area Maintenance (CAM) fees.
Plan for Maintenance
In order to keep your place free of things to be repaired, you must plan ahead for maintenance.
Develop a good communication system between the tenant and your property management company. Doing so can make repairs and maintenance reports easy.
Take note that the tenant isn’t responsible for all building maintenance or repairs.
Property maintenance is usually taken care of by the property manager. You have to keep your building a good place to stay at all times.
Reread Your Lease
Make sure all areas of the rental are identified and covered prior to using, finalizing, or negotiating any commercial for lease property agreement.
This is to avoid future misunderstandings between you and your tenants.
Not only that, you may seek help for a commercial real estate lawyer in rereading and rechecking your commercial for lease property agreement.
Once you do, make sure you have full understanding of the lease. Make sure that it also reveals the meaning of any unclear clauses and printed matter in small type or “fine print”.
Understanding the commercial for lease property agreement properly will help you explain it at ease on your future tenants.
Negotiate in Your Business’ Favor
It’s a smart move to add some conditions to your agreement that gives advantages to your business.
Negotiating favors with your future tenant can bring about a good relationship between the both of you too.
If a business lease requires alterations, make sure you account for costs to remove them when the lease is terminated. Make sure all costs are identified and charged prior to termination of the lease.
Here are terms you can negotiate…
A sublease clause will enable you to sublease your commercial property to another business.
It’s smart to cover this topic instead of leaving it up to chance. If it’s clear whether you allow subleasing or not from the outset, there need be no arguments on it later.
Also, determine if you will allow subleases to the commercial property and what the requirements for subleasing will be needed.
Spell out this clause and requirements for new sublets specifically in the commercial lease agreement.
Exclusivity clauses help in increasing sales. This prohibits you from leasing to another tenant for the same business purpose as the existing tenant.
Putting the exclusivity clause in place will ensure you don’t lease to tenants’ competitors.
How can that help you? By keeping your current tenants happier, thus encouraging them to stay longer.
If you’re leasing property where there’s a large business that brings in customers, some of your other tenants may ask to bring in a co-tenancy clause.
This is a clause that allows tenants to ask for a reduction in rent prices if a particular tenant leaves the property. The latter are usually big businesses that act as “draws”.
When these big businesses leave a property, the argument is made that other tenants now have fewer customers too. After all, the big draw of the property has already left.
This is something you’re likely to run into with commercial for lease property like malls. When big stores close or leave, smaller tenants get worried about the reduced foot traffic in the area.
They argue that they get fewer customers themselves as a result.
If your tenants insist on this, you want to draft it to precision. Include conditions that can help you control potential loss of income from co-tenancy leases, like these:
- A requirement that the tenant invoking the co-tenancy clause isn’t in default on his rent payments when he invokes said clause.
- A requirement that the tenant invoking the co-tenancy clause provide hard data showing a significant reduction in profits/revenue pre- and post-evacuation of the bigger tenant causing this event.
Final Thoughts on Creating Best Rental Terms on Commercial for Lease
Today we talked about tips and guidelines when negotiating the best terms on a commercial for lease property agreement.
Creating the best rental terms is crucial, and it serves as the core purpose of a successful rental business.
Prior to leasing a property, make sure you fill your commercial for lease property agreement with the terms best for negotiation. Terms that are strong and relevant to your interests.
Make sure that you also define your commercial lease agreement and evaluate your expenses.
Also plan for a maintenance check. It’s also wise to reread and recheck your lease contract prior to giving it to tenant.
Finally, consider the clauses I mentioned above when creating your agreement.
For more questions about the commercial for lease, leave it in the comments section below.
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