Considerations When Leasing Out Commercial Property

Lets say that you have commercial property to rent, and at least one business tenant that is interested in renting the property. That’s great news, but it’s not the end of the journey. Crafting a commercial lease that works—namely, that protects you—is another essential step in the commercial leasing process.

Before Entering Into the Lease

While you don’t have a crystal ball and cannot guarantee nothing will ever go wrong, there are some steps you can take before entering into the lease that may provide you with some level of protection.

You should treat your new tenant as if it was a business venture that you were going into: take the due diligence steps that you would take before you, for example, would buy a business or a franchise.

You’ll want to, of course, do a credit check on the business and/or its individual owners, especially if the lease will have a personal guarantee. Aside from a credit check, you’ll also want to review the business financial statements, records and documents, including tax returns, business plans, bylaws, and recent bank records.

That also may include litigation the tenant may be involved in, especially if it is being sued—while being sued doesn’t mean a business can’t or won’t pay its rent, multiple large scale lawsuits against a potential tenant could be a sign that the tenant may not be soluble for too long if it’s a smaller or mid sized business.

If the tenant has leased elsewhere, you may also want to contact the prior landlord to see about the tenant’s prior payment history and to see if there were any problems.

Remember that many of these things require releases with legally required wording to be signed, so make sure that you get these documents from your business law attorney.

Overlooked Lease provisions

Of course, rent payment is a big issue, but other issues are easily overlooked which can be just as important.

Issues as to who will pay to build out the property must be addressed, as well as who is responsible or liable for rent and to what extent, in the event that unforeseen events delay the buildout and thus the business’ ability to begin operations in the property.

Who will take care of repairs on the property must also be addressed—while most people are aware of this, many commercial leases don’t address the difference between “maintenance” and ‘repair,” and thus, it may be ambiguous later on as to who is responsible to fix and pay for what.

Exclusivity is also often overlooked—if you have a multi-unit commercial property, you may need to address this, as your tenant may expect that it is the only accountant, or smoothie shop, or dry cleaner or coffee shop in the premises.

You may or may not want to include provisions for alternative dispute resolution, like mediation. Your attorney can discuss the pros and cons to including these kinds of provisions.

Are you negotiating a commercial lease? We can help.  Contact the West Palm Beach commercial litigation attorneys at Pike & Lustig for a consultation on your case.

Source:

aaacredit.net/commercial-tenant