The success of any business often relies heavily on the location and functionality of its office or retail space. Therefore, it is extremely important for business owners and entrepreneurs to completely understand the business terms of their lease agreements. Here are 5 key business lease terms you should be familiar with before signing on the dotted line:
- Rent: This includes your “Base Rent” (the minimum amount of rent due each month), plus your share of the landlord’s expenses to operate the building or shopping center, plus your share of the Landlord’s insurance and property taxes. It is extremely important that you calculate these monthly costs in advance.
- Exclusive Use: This type of clause is very important when it comes to leasing a retail space. An Exclusive Use clause typically prevents the landlord from renting a space to a competitor or someone who owns the same type of business as you (for example: you don’t want another pizza shop opening up in the same shopping center as your pizza shop).
- Landlord Work vs. Tenant Work: In preparing your space (construction of walls, paint, carpet, HVAC and electrical systems, etc.), your lease should include an accurate description of the work the landlord is responsible to perform (or pay for), as well as a description of the work that the tenant will perform (or pay for).
- Repair Responsibilities: This clause spells out which repairs the landlord will take care of throughout the duration of the lease, and which repairs the tenant is responsible to handle.
- Assignment/Sublet: If you need the flexibility to either assign or sublet your space in the future, then you need to have such language included in the lease. Landlords are often very restricting in a tenant’s ability to assign or sublet space.