Entrepreneurs and those with expanding businesses often sign leases for operating space. If they have previously rented a home, they may take for granted that the commercial lease largely mirrors a residential lease.
Commercial leases tend to be far more complex than residential leases. They also have a greater variety of potential terms than the average residential lease. There are key differences that potential tenants need to review to determine if the lease suits their needs or not.
What are some of the most important differences to examine when reading a commercial lease?
1. The duration of the lease
Residential rental agreements often last for a year or from month to month. Commercial leases usually last for multiple years, sometimes as long as a decade or even more.
2. Maintenance responsibility
In a residential lease scenario, the landlord typically assumes full responsibility for all maintenance and repairs. Commercial leases may sometimes allocate responsibility to landlords. However, tenants may also be accountable for maintaining and repairing facilities. There may also be supplemental charges associated with maintenance services.
3. Restrictions on use
Residential leases may include provisions preventing people from using a home for business purposes. They may restrict the frequency or number of overnight guests. Commercial leases can include far more restrictive terms, potentially locking a tenant into one specific business plan. Reviewing use clauses and other restrictive language can help business owners determine if a lease might leave them struggling to pivot if the market changes.
Those who have never signed commercial leases before may need assistance reviewing lease paperwork and negotiating with a landlord, and that’s okay. Assessing the terms of a lease with a real estate attorney can help business owners and executives avoid overextending themselves.
