Tenant Considerations in Leasing Commercial Property
By: Kyle H. Jensen
Tenants determining whether commercial property is suitable for their business often consider the location and appearance of the property, the cost to rent the property, and other similar business factors. Unfortunately, many tenants, especially those new to leasing property, fail to consider numerous other issues that, while perhaps not directly related to the operation of their business, have a significant impact on their business.
One of the most important steps a tenant must take when considering whether to lease property is to read the entire lease provided by the landlord before signing. A tenant may trust the prospective landlord; however, what is agreed to verbally may not be enforceable unless it is put in writing and included in the lease. Therefore, it is important to review the lease to confirm the agreed upon terms, such as amount of rent, length of term, and size and location of the leased premises, are included in the lease.
It is also important to confirm there are no terms within the lease that are harmful to the tenant or its business. For example, landlords often include a provision in their lease that allows them to relocate the tenant. This may be acceptable to some tenants, but other tenants have chosen a property because it is uniquely suited to their purposes and relocation could significantly harm or even destroy their business. If there are any terms within the lease that are harmful to a tenant, the tenant must determine whether such terms can be removed or if the tenant must walk from the property.
The allocation of maintenance obligations between the tenant and landlord is another important term for tenants to consider. Landlords often place most if not all of the maintenance obligations on the tenant. This can be appropriate, especially in stand-alone buildings with one tenant; however, when there is shared space and multiple suites, such as in a shopping center, it is important that the landlord, at the very least, be obligated to maintain the foundations, exterior walls, roof, and any common spaces (such as parking lots), for the benefit of all the tenants on the property. Tenants should also consider whether the they want the landlord responsible for maintenance of expensive systems serving the property, such as the heating, ventilation and air- conditioning system.
Some questions a
tenant should when reviewing a lease are: (i) who is responsible for payment of utilities to the property, (ii) what is the grace period for failing to pay rent on time and
are there late fees, (iii) what are the landlord’s remedies if the tenant defaults,
(iv) does the tenant’s
obligation to pay rent abate if the premises is not tenantable, (v) does the
lease authorize tenant’s intended use of the property, and (vi) does the lease
provide for sufficient parking for the tenant’s
use? In addition to the foregoing
questions, tenants should consider whether they want to include any tenant
favorable provisions such as: (i) an option to extend the term of the lease,
(ii) an early termination right, or (iii) an option to lease additional space
in the property when such space is available.
While it is important that tenants review their lease, it is also important that tenants carefully and thoroughly inspect the prospective property, especially if the tenant has broad maintenance obligations. Generally, a lease provides the tenant is taking the property in its “as-is” condition. Accordingly, it is important that tenants inspect the property to confirm it is in good condition and suitable for tenants needs. If there are any issues with the property, the tenant should require the landlord remedy such issues before the tenant takes possession of the property. Properly investigating the property before entering into the lease will protect the tenant from costly and unforeseen repairs or maintenance bills after taking possession of the property.
Kyle Jensen is an attorney with the law firm Clark, Campbell, Lancaster & Munson, P.A. in Lakeland. Questions can be submitted to firstname.lastname@example.org.