New business owners: 4 things to watch for when signing a lease

June 3, 2020

Real estate can be one of the most expensive parts of operating a business. And any missteps or oversights could have costly consequences, including loss of space. Therefore, small business owners should make every effort to avoid problems, and this can start before you ever sign a lease.

Avoiding problems with commercial space can be as straightforward as signing a lease you understand and agree with. So, before you sign a commercial lease, you should be able to answer the following questions.

  1. What are the terms of the lease? Several details should be examined regarding lease terms. You should know what type of lease it is (either month-to-month or a fixed-term lease), how and if you can renew or terminate the agreement, as well as what the grounds are for eviction. The lease should also address your options to sublet the space and what options you have if your business must close temporarily.
  2. What are the costs? There is more to the cost of leasing space than rent. Review a lease for other expenses tenants may be responsible for, such as repairs, maintenance and rent increases. You should also be sure you know about fees for late payments and deposit conditions.
  3. Are there any restrictions that could affect my business? Consider operational details like parking, security, hours of operation, access and how you plan to use the space. Unless the lease specifies these elements, you could negotiate terms to serve your operational needs better. Putting any restrictions or permissions regarding these matters in the lease makes it easier to enforce them.
  4. Are there any unusual conditions? Some leases contain some unusual clauses. Watch for things like overly restrictive terms, unreasonable expenses or limitations on when or how you can use the space.

These are some of the most crucial elements to review before signing a commercial lease, and they can give potential tenants a good idea of whether the space is right for them.

Unfortunately, too many commercial tenants fail to thoroughly examine their lease and wind up facing operational and financial strain. Particularly if you are a new business owner, you should not rush through the lease-signing process. Take your time, review the lease with a lawyer and be prepared to negotiate terms so that you end up with an acceptable lease agreement.