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Commercial leases: what to look for

By Johns, Flaherty & Collins, SC on Friday, June 8th 2018

commercial lease

I’m relocating my home-based business to downtown La Crosse and have been looking at a number of commercial properties to lease. What are some of the things that I should look out for in a commercial lease?

With so much new commercial property in downtown La Crosse, you would think it would be easy to find space for your business. But attorney Robert Smyth said it could be challenging because commercial leases are more complicated than residential.

Questions to consider include:

  • Are you negotiating with the owner or a manager? If not the owner, make sure the person you work with has the authority to guarantee the negotiated terms.
  • How much rent will you pay and how is it calculated? Is it a gross rent based on the square footage? Or is it a triple net rental in which you pay a base rent plus a share of insurance, taxes and maintenance? If it is a retail lease you may have to pay a percentage of your sales to the owner.
  • Do you have to pay a security deposit?
  • Is your lease for a set number of years or months? Are there options for renewal? If just starting up, you may want a shorter term, but if you are more established, you may want the option of renewing once or twice according to pre-negotiated terms for renewals.

Also consider

  • Your responsibilities regarding maintenance and repairs;
  • Whether and to what extent you may alter the premises and what improvements stay with the space after you leave;
  • If commission needs to be paid to a real estate broker;
  • Whether you may assign or sublet your lease;
  • Your requirements regarding insurance; and
  • Penalties for defaulting on the lease.

“Certainly have a lawyer look over your lease to make sure your interests are protected,” Smyth said. “Oftentimes, lawyers are able to identify potential risks that the business owners don’t.”

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