It is critical to ensure that your commercial property lease favors your needs. Be aware during the negotiations to arrive at mutual agreements with your landlord. Commercial real estate attorneys can play a critical role in negotiating favorable rent terms.
Make A List Of What Your Needs Are In A Commercial Property That You Would Like To Rent
Many new business owners opt for a rental over purchasing, even when growth prospects are strong. Unlike a mortgage, a lease does not require a lot of startup capital. Plus, you are not tied down to a 30-year commitment. This gives you some wiggle room with which to adapt to growing pains without having to sell off or exchange your assets. You simply upgrade to a larger building as you expand. But one of the first steps is the negotiations to ensure that you have what you need in commercial space. Your real estate attorney can help you make the list. You must think of the square footage, the proper zoning rules, the amenities offered, and the location. Make this list before you even start looking for a property.
Gather Your Financial Documents
Before the negotiation process, you will need to prepare financial documents to answer financial questions related to the lease. What financial statements should you prepare?
- Tax returns for the past 2-3 years
- Personal or business financial reports (this depends on how you are securing the financial obligation to pay the lease rate)
- Business balance sheet.
- Profit and loss statements
- Bank statements for the past 2-3 months
Also, prepare a personal guarantee. This will demonstrate that you can personally pay the rent if your business cannot manage. Your attorney can help you fill out and prepare all the documents you need.
What Does Due Diligence Include?
A due diligence check involves careful investigation of the economic, legal, fiscal, and financial circumstances of a business or individual. After you identify a property that suits you, then you will need your attorney to help you conduct various inspections on the subject property and research other aspects of the property.
What should be on my due diligence checklist for real estate rentals?
- Research the area.
- Discuss common local home issues.
- Find a property that fits your needs.
- Line up your financing.
- Ask for the landlord’s disclosures.
- HOA’s obligations and rights
- Get an inspection.
- Consider specialty inspections.
Important Things That Should Be Included In Your Commercial Rental Lease
A commercial lease agreement is executed between a landlord and a business owner to rent a property for the business. The designation “commercial” means that the property is for business purposes instead of housing or personal use.
Common elements of a lease agreement include:
- Names of the parties to the agreement.
- The starting date and duration of the agreement.
- Conditions for renewal or non-renewal.
- A termination clause (describing what will happen if the contract is ended early or canceled by either of the parties, stating the rights of parties to terminate the lease, and their obligations).
- Identification of the premises.
- Personal property that is included.
- The insurance obligation.
- Maintenance obligations.
- Cash allowances.
- Grace periods.
- Options to renew or purchase the lease.
- Common area maintenance.
- Lease Termination.
Your attorney will help you find out whether the property has any additional costs that are charged to the tenant so that those additional costs can be negotiated.
About Estevez Law Group, P.A.
Helping clients with real estate, commercial real estate transactions, residential property purchases and sales, estate planning, and more! Skillful legal representation can simplify complex real estate transactions and solve problems that frustrate all parties involved. At the Estevez Law Group, P.A. our boutique real estate law firm and title agency assists clients with all types of residential and commercial property matters.
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