8 Potential Deal Breakers in Any Commercial Lease

In this article, you'll learn:

• The importance of flexibility in assignment, subletting, and lease lengths.
• Why you should avoid clauses that limit your legal rights or impose personal liability.
• The risks of convenience clauses and unfavorable renewal terms.
• How restrictive office rules can impact your business operations and costs.

Many corporate clients enter into a commercial lease agreement in good faith. They believe their landlords are presenting them with reasonable lease agreements. However, no matter how nice your landlord may be, they are likelier to create agreements that favor themselves. After all, they are in the business of commercial real estate. To avoid falling into lease loopholes, here are a few potential deal-breakers to be wary of in any commercial lease.

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1. Inflexible Assignment and Subletting Clauses

When landlords lease out office space, they want to hold onto their tenants. This is why you have to be cautious of inflexible assignment and subletting clauses. Look carefully to ensure you have signed an agreement that allows you to find someone else to take over your space and pay some or all of your rent for you if you no longer need it.

2. Unreasonable Lease Lengths

Sometimes, you don’t need a lengthy lease. For instance, if you are just starting, there are high hopes that you may outgrow your space. In such situations, having a long-term lease may prove to be counterproductive, as you may have to pay some hidden costs which may include relocating costs. A short-term lease gives you more flexibility, and it is great for businesses that have opportunities to grow.

3. Convenience Clauses

Before you sign the lease agreement, ensure that it doesn’t contain convenience clauses. A convenience clause allows your landlord to terminate your lease at any time without providing you with any a reason for the termination. This clause makes greedy landlords very powerful and can lead to you finding a new office space when a new tenant provides a ridiculous sum for your space.

4. Forfeiture of Legal Rights

Sometimes, landlords go against the contract terms that are stated in the contract document. Hence, you may need to take legal actions. A good contract will not waive your legal rights to take any legal action against your landlord.

5. Personal Liability Clauses

Signing a commercial lease agreement that makes you personally liable for your company's rent and common area maintenance (CAM) fees can prove to be a huge mistake, for the landlord can come after you in the event of a default.

6. Unwilling to Put Terms in Writing

It is important to emphasize that verbal agreements are not enforceable in a court of law. You should demand a written document stating all the agreed clauses. This would help both parties in avoiding unnecessary conflict.

7. Unfavorable Renewal Terms

The ideal real estate contract will allow you to decide the renewal option of your contract at the end of the lease. You shouldn’t be compelled to renew or leave the property at the end of the lease.

8. Restrictive Office Lease Rules

Many commercial real estate leases have certain building rules, so ensure you look carefully to ensure they won’t affect your business practices. For instance, building rules that prevent you from using air conditioning on weekends may cost you additional expenses which could have been avoided.

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