7 Questions To Ask Before You Sign A Commercial Lease

Signing a commercial lease can be a huge financial decision. Whether you are renegotiating your current lease terms or relocating your office space, here are important questions to ask before you sign a lease.

1. What are the Lease Terms?

This is perhaps the most important question to ask. Typically, commercial leases range from 3 to 10 years, and the term is usually negotiable with the landlord. Nevertheless, it is important to know when the lease will begin, so you can determine when it will end. This is usually important because some spaces may need some last-minute changes which may delay when you can move into the building. For a space that is already occupied, last-minute problems may include an old tenant refusing to move out or late completion of construction.

2. Are You Building for the Future?

This question is very important, especially when determining your space needs. Most landlords expect you to sign a 3 to 5-year lease, or possibly even a 10-year lease. It is widely acceptable to rent a space that is larger than your current needs than one that is insufficient because you can easily sublease unused space. However, it is important to know if your landlord is going to accept any future sublease plans.

3. Is the Location Safe?

In a post-COVID-19 world, employees and customers are attracted to areas without widespread covid cases. Therefore, it is important to pick office buildings in an area where there are low covid cases as well as criminal records. Areas with lots of vacant buildings attract unsavory characters.

4. How is the Rent Calculated?

Rent is a huge business expense. Commercial rents are generally measured by the annual cost per square foot of the space, but there are many ways to calculate rent. For example:

Gross lease. This is a type of lease where the tenant pays a flat monthly amount, while the landlord is responsible for all the expenses of operating the building, including taxes, insurance, and repairs.

Net lease. Under a Net Lease, the tenant is required to pay for some or all of the commercial real estate taxes on a property, in addition to the base rent.

Other rent calculations include the net-net leases, triple Net leases as well as percentage leases.

5. Who's Responsible for Insurance?

Many companies are in a rush to lease office space that they forget to pay attention to the insurance. This can be very disastrous especially when the building experiences any unfortunate incidents such as a major fire outbreak. Landlords in general are expected to be responsible for insurance on common areas, such as lobbies, stairways, and elevators. It is important to note that they also have the right to insist that tenants be responsible for their insurance to protect the landlord against claims that might arise from the conduct of their businesses.

6. Who Owns the Building?

When the owner of the building isn’t within the local area, it might be difficult to get property-related issues quickly resolved. Regardless of where the landlord lives, it is important to carry out background research and learn more about the reputation of the landlord with other tenants. This will help you know if the landlord is problematic.

7. Do You Understand the Lease?

Commercial leases are complicated documents. It is important to work with a tenant rep to understand the terms and clauses in the document. A good tenant rep broker will help you negotiate a more favorable term and represent your interest.