Unlocking your commercial lease: Six tips to consider before you sign |
While a full lease review is extensive and difficult to summarize in a single post, here are 3 lease review tips and 3 practical tips as helpful starting points:
Review Tip 1 – How much are you paying monthly?
Familiarize yourself with the types of commercial leases, including gross, modified gross, net, double net, and triple net. In a nutshell, a gross lease typically includes most or all expenses in the monthly rent. A net lease usually covers only base (or minimum) rent, and you need to pay additional rent to cover: Property tax Building insurance Maintenance and operating costs. Additional rent commonly varies annually, unless otherwise stated in your lease.
It’s important not to rely solely on the title of the lease. A document labelled “Gross Lease” may actually operate as a modified gross lease, with extra fees being allocated to the tenant.
Confirm with the landlord in writing if there are any additional fees to consider for the term, such as utilities, rent escalations (annual increases based on a fixed rate or CPI), parking fees, signage fees, snow removal fees, and security deposits.
Review Tip 2 – How long do you have for the space?
The term determines how long you have the right to occupy the space, but you also need to consider what happens when the term ends.
Including options to renew or extend is beneficial. These options give you the choice, but not the obligation, to stay for a predetermined period after the initial term ends. Review the holdover clause,........