Negotiating a Commercial Lease
June 26, 2017 | Accounting Standards, Business Plans
Maybe your Maine-based small business is ready to move to a bigger location, and you are interested in obtaining a commercial lease. A commercial real estate lease, like any other contract, can be negotiated. Do not use or accept a form lease submitted to you by another party. The lease should be slanted so that you as the business owner obtain the maximum legal, economic and tax advantages.
Get qualified legal advice before signing any contract. To fully and adequately protect your rights, here are some important considerations in a lease:
- Your business can move in and start paying rent after a certificate of occupancy has been issued. The space should be ready for use with only minor construction or decorating details left to be completed.
- If something happens, through no fault of you or your business, so that you can’t move in by the time set, what will happen? Some remedies could include rent abatement, money damages, cancellation, or reimbursement of prepaid deposits.
- Rent should be stated as flat rent, step-up rent (gradual increase in rent), percentage of gross sales or base rent plus percentage of net sales. The owner should spell out exactly how and when any rent increases might occur.
- The lease should state who pays for all utilities, maintenance, and other costs associated with the space.
- Do you have the right, as tenant, to remove any existing fixtures in the space? Make sure the commercial lease specifies if you are entitled to remove or change any alterations paid for by you.
- Is there a warranty by the landlord that any use, storage, treatment or transportation of hazardous substances on the premises is in compliance with all applicable laws, regulations and ordinances? In addition, the landlord should include a warranty that no violations of these laws and regulations has occurred at the location.
- If hazardous items were previously used on the premises before your small business took occupancy, the landlord should agree to indemnify and hold you harmless from any claims, damages, fines, judgments, penalties, liabilities and costs that may be incurred due to an investigation from any authorities.
These are only a few of the many issues involved in a commercial lease. Before signing, discuss your lease details with Filler & Associates to make sure you completely understand the terms, as well as the tax implications.