Austin TX Business Law Blog

Monday, January 13, 2020

What to Look for in a Commercial Lease

There are plenty of documents that come across your desk as a business owner. Most are standard and you can easily get complacent in reviewing specific terms. For instance, you may have to enter into a commercial lease. Most commercial leases are standard. That being said, you should still take great care in reviewing and understanding the terms of your commercial lease. Leasing commercial space is a big deal and the terms of your lease can have a substantial impact on your business.

What should you pay attention to in a commercial lease?

When you are entering into a commercial lease, you should pay particular attention to certain terms that may otherwise get overlooked. For instance, always be clear on the term of the lease. Know when it is set to begin and when it will end, and understand your renewal options. If there is a renewal clause, make sure it allows you to continue your occupancy under the same or similar terms. Also, check on whether the renewal would be automatic or optional dependent on mutual agreement between you, the tenant, and the landlord.

Another key term to fully understand in your commercial lease is rent. Know what your rent includes and what it does not include. Your rent may include things like insurance, maintenance costs, and property taxes. This is referred to as a “gross lease.” If not included in your rent, you will need to pay for these things separately.

It may seem silly to mention this, but it is important. Know what space you are renting. This means, know the exact space you are renting. Understand things like how the landlord measured the space. Sometimes, wall thickness is included in the measurements. Be aware of what common areas you have access to and are included in your rental. This includes things like hallways and elevators.

You will also want to be aware of whether or not your lease may be assigned or subleased to someone else. In a sublease, a subtenant would rent all or part of the property form you for a set period of time. A new agreement would be drafted for you and the subtenant, but you are still held responsible for your obligations to the landlord under your own lease agreement. In an assignment, an assignee would agree to carry out the remainder terms on your agreement with the landlord. The assignee would then assume all your lease obligations to the landlord.

There are several other important commercial lease terms, such as:

  • Whether a security deposit is required and the conditions for its return
  • Who pays for improvements to the space
  • Who is responsible for maintenance and repairs
  • Allowable signage for your business (what kind and where they can be displayed)
  • How the lease may be terminated
  • Method for dispute resolution

Texas Business Law Attorney

While it easy for things like lease agreements to get lost in the shuffle, taking the time upfront to properly review agreement terms can save you a lot of headache and expense further down the road. The Kumar Law Firm is here to help you and your business wade through the pile of legal documents that will come across your desk. We provide trusted legal counsel to help businesses succeed. Contact us today.

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