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Special considerations in a commercial lease agreement

On Behalf of | Jan 4, 2022 | Uncategorized |

Whether they are jumping into a new venture or beginning a new phase of development of an existing business, Florida business owners will often choose to lease rather than purchase property. Renting property is less expensive and does not require the capital that is part of buying real estate. In the competitive Florida west coast real estate market, however, it is important to know what you want before entering into negotiations.

Factoring in the length and cost of the lease when determining its suitability to the business’s needs, as well as understanding the terms and conditions, are top priorities. In order to protect the best interests of the company, it is beneficial to get a detailed review of the contract before moving forward.

Doing risk assessment first

The typical commercial lease is three to five years in Sarasota and elsewhere. Commercial leases differ from residential lease agreements in that they are often highly negotiable, as the needs of the tenant are variable. Commercial leases usually continue for much longer than a residential lease, so once they are locked in, the business must be able to function as the market or its needs fluctuate.

Commercial leases also do not benefit from consumer protection or landlord-tenant laws, and in a commercial lease agreement the tenant may have to pay a portion of the property taxes. For these and other reasons, it is essential for business owners to have a clear understanding of the terms of the lease and any potential liability when negotiating.

Negotiating the lease

There are important terms and conditions in a commercial lease agreement that should consider the unique needs of the business:

  • There should be clear language about rental amounts and increases, usually calculated in square footage, and the amount for the security deposit and return. Negotiable items can include a percentage of annual increase and caps, utilities, repairs, property taxes and insurance.
  • The exclusivity clause will contain conditions for what activity will occur on the premises, so negotiating for a broad usage clause is advisable, as well as for the right to sublet a space or for a separate exclusivity clause barring the landlord from renting out the space to a competitor.
  • It should be clear what modifications to the space can occur and who may make them, as well as whether the lessee must return the space to its original condition.
  • Getting clarification is important on which party has the responsibility or obligation to make necessary alterations, such as handicapped accessibility, that comply with the Americans with Disabilities Act (ADA) requirements.

Business owners should be aware of these and other considerations when negotiating a satisfactory arrangement.

 

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Dana Watts is a board certified civil trial lawyer by the Florida Bar Board of Legal Specialization with more than 30 years of litigation experience. He also received an AV* peer review rating through Martindale-Hubbell.

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