Should I Have an Attorney Review My Business Lease?

We guide you through the essential considerations when reviewing a commercial lease agreement for your business.

Whether you’re a seasoned entrepreneur or launching your first venture, navigating a commercial lease agreement can be complex. These documents often contain legal jargon and intricate clauses that can leave you puzzled. With millions of small businesses operating across the United States, you’re not alone in facing the challenges of understanding and negotiating a business lease. If you’re preparing to sign a lease for your business premises, it’s crucial to know what to look for and consider seeking professional advice.

What Is a Business Lease?

A business lease is a legally binding contract between a landlord and a tenant for the rental of commercial property. This could include office space, retail locations, warehouses, or industrial facilities. Unlike residential leases, commercial leases often offer less legal protection to tenants and are typically more negotiable. They can vary significantly in terms, length, and conditions, making it essential to understand the specifics of your agreement.

Types of Commercial Leases

• Description: The tenant pays a fixed rent, and the landlord covers all property-related expenses like taxes, insurance, and maintenance.
• Where to find: Businesses that prefer predictable monthly expenses can look for smaller spaces under 1,000 square feet in older buildings, where full service lease structures are more common.

• Single Net Lease: Tenant pays base rent plus a portion of property taxes.
• Double Net Lease: Tenant pays base rent plus property taxes and insurance.
• Triple Net Lease: Tenant pays base rent plus property taxes, insurance, and maintenance.
• Watch out: These types of leases are the most common, but come with extra contractual obligations that can be confusing to make sense of for the uninitiated.

• Description: Common in retail spaces, the tenant pays a base rent plus a percentage of their gross sales.
• Ideal For: Businesses that expect high sales volumes and want a lower base rent.

Key Sections to Review in Your Commercial Lease

While this isn't a comprehensive list, we've compiled some of the most common terms you'll find in a retail, industrial or office lease for a small business, and provided things to look out for:

1. Premises Description: Ensure the leased space is clearly defined, including square footage and any shared areas.

2. Lease Term: Confirm the length of the lease, renewal options, and conditions for termination.

3. Rent and Expenses: Understand the base rent, additional expenses (like utilities and maintenance), and how and when payments are due.

4. Security Deposit: Know the amount required, conditions for its return, and any circumstances where it may be forfeited.

5. Use Clause: Specifies how the premises can be used. Ensure it aligns with your business activities and allows for potential future changes.

6. Modification and Improvement Clause: Details who is responsible for build-outs or modifications and who owns improvements at lease end.

7. Maintenance and Repair: Outlines tenant and landlord responsibilities for repairs and maintenance of the premises.

8. Assignment and Subletting: Understand your ability to assign the lease or sublet the space to another party.

9. Default and Remedies: Specifies what constitutes a default and the remedies available to the landlord, including eviction or acceleration of rent.

10. Insurance Requirements: Details the types and amounts of insurance you must carry.

11. Signage: Regulations regarding business signs, including size, placement, and approval processes.

12. Dispute Resolution: Procedures for resolving disputes, such as mediation or arbitration clauses.

Should You Hire an Attorney?

Sort of.. Maybe?Given the complexity and potential financial impact of a commercial lease, getting any type of second opinion can be a wise investment. For business owners uninterested or unsure about how to negotiate for themselves, an attorney can:

• Identify Unfavorable Terms: Spot clauses that may be detrimental to your business and negotiate more favorable terms.

• Clarify Obligations: Ensure you fully understand your responsibilities and liabilities under the lease.

• Protect Your Interests: Advise on clauses that safeguard your business, such as options to renew, sublease, or terminate early.

• Negotiate Modifications: This is the big one: Attorneys “act on your behalf” to work with the landlord or their attorney directly to amend clauses that are unclear or unfavorable.

The downside? Having your lease reviewed by an attorney can involve steep upfront costs and take extra time. It could also save you from expensive legal disputes or unfavorable lease terms in the long run. So it's a mixed bag.

Alternative Options To Hiring an Attorney to Review a Lease

If hiring an attorney is not feasible or preferred, consider:

• Professional Lease Review Services (that’s us!): Companies specializing in reviewing leases can provide insights faster, and at a lower cost than an attorney.

• Thorough Self-Review: Dedicate time to meticulously review the lease, researching any terms or clauses you don’t understand.

Signing a commercial lease is a significant commitment that can have long-term implications for your business. Understanding the terms and ensuring they align with your business needs is crucial. While it’s possible to review a lease on your own, the expertise of an attorney or professional lease reviewer can provide peace of mind and potentially save you from costly mistakes.

Take Action Today

Before you sign on the dotted line, consider all your options for reviewing your commercial lease. Whether you choose to hire an attorney, use a professional service, or conduct a thorough self-review, taking the time to fully understand your lease agreement is an investment in your business’s future success.

Need Assistance with Your Commercial Lease?

Navigating a commercial lease doesn’t have to be overwhelming. Our team has years of experience reviewing leases just like yours. We provide comprehensive reviews and easy-to-understand summaries to help you make informed decisions.