Examine key issues when leasing commercial property

The following are some of the issues that should be discussed with your landlord and addressed in your final lease:

• Legal description. It is always advisable to include a legal description in the lease, along with the total square footage leased.

Also, if you are leasing less than the whole of the property, that should be stated in the lease.

• The term. Leases sometimes commence “upon occupancy.” Write the landlord a letter stating the date you took occupancy so there will not be a question when the lease ends.

• Options. If the landlord will grant one, always get an option to renew. You do not want to be told you cannot renew when the location has become important to your business and known by your customers.

• Fixtures. If you are going to install trade fixtures in the property, make sure your lease specifies that you may remove them when the lease is over, despite their being attached to the real property.

• Permitted uses. Confirm that your anticipated use conforms to the zoning for the property, even if your landlord does not question the use.

Moving after taking occupancy will be expensive.

• Repairs and maintenance. Tenants may be required to repair and replace expensive systems, such as heating, ventilation and air conditioning. Knowing what your lease says will help you avoid unanticipated expenses.

• Signs and advertising. If your business requires signage, have the proposed design and location approved by your landlord in the lease, and check its conformity with local zoning ordinances.

• Insurance. You may be required to carry large liability policies by your lease. Check with your insurance agent to determine in advance the cost to comply with the requirements. If you are overinsured, suggest reducing the limits.

• Assignment. Most leases prohibit assignment without the consent of the landlord, but you might include in the lease the right to assign to a wholly owned or affiliated company.

• Grace period and notice. Your lease should have a provision requiring your landlord to notify you if rent is not received on time, and to allow a reasonable period of time to cure.

Large companies may not realize rent has not been paid or payment may be lost in the mail.

Without a grace period, the landlord may be able to declare a default.

• Attorney fees. Leases may make you liable for the landlord’s attorney fees if an action is brought against you.

Suggest the losing party pay the winning party’s legal fees instead, so that the obligation is mutual.

• Review of lease. A three- to five-year lease may cost many thousands of dollars in rent.

It is advisable to have your attorney review the lease to protect your interests.

Stephen F. Aton is an attorney practicing corporate law and estate planning and real estate. He owns Aton Title Co. LLC and can be reached at steve@atonlaw.com.[[In-content Ad]]