Category: Medical Real Estate

Understanding Commercial Leases

Feb25
2013
Posted by
Brokerage,

Once you decide to start your own business, it is imperative that you understand the basics of a commercial lease. Renting commercial space is a big responsibility and the success or failure of your business may depend upon certain terms of the lease. It is therefore recommended that you work with a Tenant Advisor to ensure that you understand the market and have an advocate in the negotiation of deal terms.

Before you approach a landlord, you should understand how commercial leases differ from residential leases. Here are three of the biggest distinctions:

  • Consumer protection. Commercial leases are not subject to most consumer protection laws that govern residential leases so there are no standard forms. Rather, most commercial leases are customized to fit the landlord’s needs. As a result, you should thoroughly examine every commercial lease agreement that is offered to you.
  • Long-term, binding agreement. The lease is a legally binding contract with a good deal of money at stake for the signing parties. As a result it is extremely difficult to break or change a commercial lease. Commercial leases are generally subject to much more negotiation between the business owner and the landlord. However, depending on the eagerness of the Landlord they may be flexible and receptive to special features for a tenant’s office space and possibly lease clauses.
  • Meeting Your Business Needs: Before you sign a lease agreement, consider the amount of rent you’re planning to pay, company budget and the length of the lease. With a growing company it’s important to consider not only today’s budget but also expected future changes in staffing, patients and space needs.

While you may not want to commit to a longer term lease, these often provide better incentives like lower rates and more willingness for a Landlord to spend money on improvements or offer concessions. A shorter-term lease with renewal options may be safer so you can carefully determine how your business may grow and if the location is right.

Working with a real estate professional and space planner can help determine the proper balance and offer some good guidance. A main concern is the physical space and its efficiency. Specialists in advising on real estate matters can help assess the required modifications to the existing space, [i.e., adding offices, exam rooms or rewiring for better communications] to make sure that first it is possible to make the necessary changes, and more importantly, to provide valuable advice in negotiation of the Landlord’s contribution.

There are myriad items that must be addressed in every lease. While every business owner has different needs and intents, before signing a lease, make sure your decision is well thought out, because your future will depend on it.