Terms You Need to Know Before Signing a Commercial Lease
When you sign a commercial lease, you are making a significant commitment for your company. These leases are typically not under the same consumer protection laws as residential leases, which means that you need to know the terms of the lease and exactly what commitments you are making. Before you sign a lease, you need to know several clauses that may be included in your agreement. An experienced business planning attorney can help you better understand the terms of your lease as well.
- Exclusivity – While the location of your business is important, you also need to understand the limitation on any competition. A commercial lease should guarantee that your landlord will not lease a nearby space to a business that would be in competition with you, although this may depend on the exact nature of your business. For example, if you are a doctor, you may not want another physician in the building with your specialty but having doctors who have different specialties may be acceptable.
- Radius Clause – In addition to protecting your business, your landlord may want to protect their business interests as well. They may want a radius clause included in the agreement that will prohibit you from opening another location close to the leased property so that business continues to flow to their location and not another one.
- CAM – Companies typically pay a fee for CAM, or common area maintenance. However, how this fee is apportioned is very important. You will want the CAM fee based on the total percentage in the building, not the total leased space. If it is apportioned to your leased square footage, you will pay a fee based on your leased square footage, but if it is apportioned to leased space, you will pay a fee that covers the unleased units as well.
- SNDA – If your landlord has a mortgage, you may be required to sign an SNDA, or Subordination, Non-Disclosure and Attornment Agreement. This document will protect the holder of the mortgage by stating that their loan is superior to the lease and that you will recognize them as your landlord if the mortgage goes into default. Be sure that you have the right to negotiate the SDNA and have a business planning attorney review it before agreeing to sign.
- Compliance – Before you sign a lease, it is important to have an engineer or architect ensure that the building is in compliance with the Americans with Disabilities Act and other regulations. If they discover any problems, you will need to contact the landlord who will have to correct the issues. The landlord may ask you to share the cost. If you signed the contract before completing the review, you may be solely responsible for the costs of bringing your rented area up to standards depending on the terms of your lease.
Contact an Experienced Business Planning Attorney
The above terms are just a few terms that can be critical when signing a commercial lease. Attorney David Toback is an experienced Florida business planning attorney who can review your potential lease and ensure that your rights are protected. Contact his office today to schedule a consultation.