How to Properly Review Commercial Lease Agreements

How to Properly Review Commercial Lease Agreements

The saying "commercial follows rooftops" rings true in Pensacola, with commercial rent prices per square foot doubling between 2019 and 2021. This increased demand for commercial real estate means that commercial lease agreements have also become more complex. While a hot real estate market presents a profitable opportunity, you must ensure your deal is.

This guide will help you review your commercial lease agreement before signing.

Read the Entire Agreement

Your first step in commercial lease review is to read the entire document. If you are unfamiliar with reading leases or commercial contracts, you may want to work with a commercial property manager or real estate attorney. These real estate professionals can guide you through the potentially complicated lease terms.

Read It Again

Once you read through the lease, do it again. Commercial leases can be quite lengthy with many terms. If you are not accustomed to reviewing commercial leases, you will miss things the first time.

While residential leases tend to be fairly standardized, this is not the case with commercial leases. The terms can vary greatly and become complex. You need to know what you are agreeing to.

Check the Terms

While you read through the lease, make a note of key terms. These include lease length, security deposit, lease termination, and the property you are leasing. Often, it is a disagreement of these basic terms that causes a commercial lease party to have problems.

In addition to the specific terms, look out for these potential lease hangups. Pass-through costs are expenses the property owner passes along to the renter. If not checked, you may agree to more fees than you are prepared for.

Commercial leases can charge rent based on square footage. An incorrect measurement could mean paying more rent than you get in usable space.

Finally, businesses open to the public with over 15 employees must comply with the Americans with Disabilities Act (ADA). A business renter must confirm who is financially responsible for making a premises compliant.

Look for Use Restrictions

Like an HOA board enforcing residential community guidelines, your commercial lease can restrict commercial property use. In addition, Florida statutes can limit how you use commercial real estate.

Check for terms that define the improvements you can make. Look for restrictions or requirements for signage.

Then, there are use clauses that define how you can use the property. Conversely, there could be restrictions on what you cannot do with the property.

Finally, an exclusivity clause will give you usage protection.

Verify Conflict Resolution Terms

No one wants to have conflict. However, you must hope for the best and plan for the worst. Verify the conflict resolution terms before signing.

If there is a problem or disagreement, you and the property owner must follow these terms to determine a resolution.

Review Commercial Lease Agreements

When engaging in commercial lease negotiations, it is crucial to read and understand the entire lease document carefully. Commercial lease agreements can be complex, with varying terms that include lease length, security deposit, rent amounts, and other critical elements. Working with a real estate professional can provide valuable insight and guidance.

Schedule a meeting and let our property managers help you review your commercial lease terms for accuracy and favorability.