How to Spot Issues Before Signing a Commercial Lease
Signing a commercial lease can be a very exciting experience — particularly for new business owners. You’ve researched the market, found the perfect neighborhood, and finally landed the best location for your business.
All that’s left to do is sign the lease.
The worst thing a person can do at this point is to blindly sign their name on a legal document without fully understanding the content, or discussing the matters contained within. The stipulations included in the lease will have long-term consequences and ramifications. You want to be sure you know exactly what is in there.
Commercial real estate brokerage firms are there for you when you sign your next lease in Nashville, TN, but what should you be looking out for?
Here are 7 questions you should ask before signing a commercial lease:
- Does the Area Support Your Needs?
- Who’s in Charge of Common Area Maintenance?
- Are There Potential Additional Fees?
- Who Is Responsible for Repairs?
- What Needs to Be Done to the Property Before Moving In?
- What Is the Term Length?
- What Happens if the Business Is Sold?
1. Does the Area Support Your Needs?
There are a number of considerations that need to be met in order to use a commercial space for your intended purpose. Ideally, you’ll have performed your due diligence before signing the lease.
This includes considerations such as making sure the building is zoned for your particular business. It also includes more technical considerations such as making sure the building has sufficient electrical capacity for your needs.
2. Who’s in Charge of Common Area Maintenance?
Common area maintenance (CAM) can be a big sticking point with many tenants, particularly if the building has multiple tenants. This refers to areas that are used by everyone and could include the parking lot, a lobby, or any other space that is outside of your particular rented area but still on the premises.
It needs to be outlined who is in charge of these areas and how often they are to be maintained.
Visit Southeast Venture to learn more about how a commercial real estate brokerage firm in Nashville can help!
3. Are There Potential Additional Fees?
There might be additional fees on top of the base rent. CAM is an example of a potential source of additional fees. Fluctuations in property tax are also occasionally funneled down to tenants within a commercial building.
Surprise charges are never a good thing. Make sure you know what to expect in the way of additional charges so they don’t take you off-guard.
4. Who Is Responsible for Repairs?
Signing a commercial lease is similar to signing a residential lease with a few exceptions. Repairs will almost always fall on the shoulder of the owner in a residential transaction, but that can be a little more murky with commercial leases.
Discuss which areas are your responsibility and which areas are to be maintained by the property owners.
5. What Needs to Be Done to the Property Before Moving In?
Many commercial properties will need a little work before the tenant can occupy the space. This could include some cosmetic touch-ups. It could also include some heavy duty equipment installations.
Property owners will occasionally help with some of these alterations, but not if you don’t bring it up.
6. What Is the Term Length?
How long is the lifespan of the lease? Is the rent secured throughout this period or does it increase after a certain amount of time? What are the terms of a renewal?
These considerations might be a ways off down the road, but they are important. Get them figured out beforehand so you know what to expect.
7. What Happens if the Business Is Sold?
Unfortunately, businesses don’t always last as long as the terms of the lease. The business owner might be forced to close their doors or they might sell their business to a new owner.
Selling your business might be contingent on keeping the location, and a property owner that is unwilling to transfer the lease can be the end of your sale. Negotiating this stipulation at the outset will set you up should this scenario arise.
Work With an Experience Commercial Real Estate Brokerage Firm
The best way to make sure you know exactly what you are signing yourself up for is to work with an experienced commercial real estate brokerage firm in Nashville, TN. Southeast Venture has been helping businesses find and secure the perfect location for years.
But there’s more to it than just finding a great-looking building in a nice neighborhood. You are going to need your commercial real estate brokerage firm to negotiate on your behalf. All of the stipulations within the lease are negotiable, and the property owner is going to try to swing these details in their favor.
But these property owners need you just as much as you need them. You have more negotiating power than you might think, and a commercial real estate brokerage firm will know how to balance that idea.