Residential leases are full of legally required safeguards to help keep them fair because everyone needs a home, and virtually no one hires an attorney to review their rental agreement. Commercial leases are an entirely different beast. The rules protecting home renters do not apply in the commercial context, as both parties are presumed to be “sophisticated” (i.e., they understand the law and the world of commercial real estate).
The good news is that this frees up both parties to negotiate almost all of the agreement’s terms, allowing for much greater flexibility. However, it does mean that commercial lease negotiations are generally more complex. For this reason, it is often a good idea to hire a commercial real estate attorney to help you. Here are a few reasons why.
As mentioned above, most of the terms of a commercial lease are negotiable. This can be a good thing, as it allows you to reach an agreement that meets your specific needs, but to take advantage of this, you need to be aware of your options. Commonly negotiated terms include:
- Property Taxes & Insurance – Depending on the type of lease, it’s not unheard of for renters to be responsible for not just the rent but also property taxes and insurance premiums. Of course, this is more advantageous for the landlord, but as with everything in negotiation, it can be used to obtain more favorable terms in other areas.
- Maintenance Costs – This can cover everything from security to utilities, which can add up quickly. The renter can be responsible for some or all of these costs, and the lease should identify this.
- Term Length – Commercial leases are typically of a much longer duration than residential leases, and it’s not uncommon to see leases that last five years or more. Longer leases usually mean lower rent, though they also mean higher potential costs if you want out early.
- Competitor Clause – If you are a retailer or restaurant owner, you may want to restrict the landlord from leasing to competitors near your business.
- Termination Clause – If you need to end the lease early, what happens should be clear. Are you responsible for paying the remainder of the lease? Can you sublet the space?
These and other important terms are all on the table during a commercial lease negotiation. Having an attorney who is familiar with all of your options can help you find the right balance.
Renegotiating Your Commercial Lease
If there’s one constant in business, it’s that things are constantly changing. The economy goes up or down, consumer trends shift, etc., which can affect your business. If you find yourself in a position where you need to lower costs, it may be possible to renegotiate your commercial lease. Of course, the landlord’s willingness to renegotiate will depend on the real estate market. Still, in general, landlords prefer the stability of a paying renter compared to the uncertainty of finding a new one.
Having an experienced real estate attorney can greatly help this situation. Not only do they understand the ins and outs of commercial leases, they can also relieve a lot of stress when needed.
Talk to a Commercial Real Estate Specialist
Our experienced team understands the Southern California real estate market and knows how to get the best deal for your business. Whether you are just starting or are looking to renegotiate, Hoffman & Forde can help put your business on the best footing possible. Schedule a consultation today to talk to one of our real estate specialists.