Commercial Property Leases

There are a number of factors that go into making the decision to rent commercial property. You will need to consider where the property is located, its zoning and allowed uses, the amount of space it provides, as well as the affordability of the price and the potential for your business to grow at the location. You will want to do your homework, thoroughly investigating every detail and nuance of the property to ensure it meets your needs both now and in the foreseeable future. Once you have settled on a particular rental property, now comes negotiating the lease. Entering into a commercial real estate lease is no small matter, and commercial leases differ in a number of ways from residential leases. Before signing a lease, make sure you know exactly what you are getting into to ensure any potential problems further down the line.

Differences between Residential and Commercial Leases

If you have ever rented an apartment, condominium, or townhome, you may think you know all about lease agreements. The fact is, commercial lease agreements are radically different that residential lease agreements. The difference between commercial and residential leases include:

• Residential renters are covered by consumer laws and protections that are not included in the actual lease document. Commercial renters do not have these protections.

• Residential leases include a warranty of habitability. This means that residential tenants are entitled by law to property that conforms to common levels of safety and sanitation. There is no such warranty in commercial leases.

• If a tenant breaks a residential lease, the landlord has an obligation to mitigate costs to the person breaking the lease by seeking a new tenant. Commercial landlords are not obligated to do this.

Whereas residential leases can be for a period of months up to a year or longer, commercial leases are generally far longer. Some commercial leases involve a minimum commitment of five to 10 years.

Negotiating Your Commercial Lease

While residential leases typically go by a standard form, commercial lease agreements are the product of negotiation. In recent years, there have been efforts to develop standardized commercial lease agreements. While some language may be similar among different documents, you will still want to pay extra attention in negotiating commercial lease terms, which involves submitting a letter or memo to the landlord that either confirms your acceptance of the lease, or spells out areas in which you would like the lease to be revised. The items to pay closest attention to in a commercial lease include:

• The amount of rent you will be responsible for, and the amount of rent increases each year;
• The exact specifications of the space you are renting;
• Provisions for renewing or terminating the lease;
• Provisions regarding who is responsible for upgrades, repairs, and insurance on the space; and
• General services provided by the landlord, such as the paying of utilities and taxes.

Contact Our Experienced Real Estate Attorneys

When you are looking at leasing commercial space, you want to make sure the money you are investing is protected. You want to lease a property that will allow your business to grow and flourish, and one that will make you money rather than draining you of your funds. At Cavallo & Cavallo, our experienced New York real estate attorneys can help guide you through every step of the commercial leasing process, ensuring your rights, as well as your investment, are protected.