What Legal Protections Should Be Included in a Commercial Lease Agreement?

Is Your Business Protected?

Running your own business is great, but anyone who has done so knows that legal pitfalls lie around every corner. Many business owners rely on leasing commercial property to operate their businesses from. While most are great at creating business-to-client contracts, many may not understand predatory lease terms that commercial real estate owners slip into their contracts. Missing these clauses and loopholes can spell disaster for your business in the future.

What is a Commercial Lease Agreement?

Whether you are a small business looking for your first space, a large business expanding into Daytona Beach, FL, or a landlord looking to rent out a commercial space, a commercial lease will be at the center of your business relationship.

A commercial lease is a legally binding contract between a landlord and a business tenant. It outlines the terms for renting commercial property, which can include offices, retail space, industrial space, or anything used to operate a business.

Your commercial lease should be the first document you check when you are wondering about the specifics of your rental, such as the end date of your agreement or what the property can and can’t be used for. It is also where you can find out about maintenance responsibilities and tenant and landlord expectations.

How Are Commercial Leases Different From Residential Leases?

Residential leases are designed to protect renters who live in a rental property. It offers strong tenant protections under Florida’s landlord-tenant laws. Most residential rental agreements are fairly boilerplate, offering the same terms for most renters.

Commercial leases, on the other hand, are negotiated contracts between two business entities, one being the renter and the other being the landlord. These contracts offer fewer legal protections for tenants than a residential agreement. A commercial lease agreement should not be boilerplate. They are complex, customizable, and include many terms regarding the operation of a business. If a commercial landlord presents you with something that looks like a template, it is likely missing key terms and conditions.

What Should a Commercial Lease Include?

As a business owner, your commercial lease should be specific to you, your business, and your specific situation. Many landlords resort to using lease templates, which can leave too many factors uncovered, leading to conflicts and even issues with the city for conducting the wrong kind of business according to what the property is zoned for. Commercial leases can also include predatory terms that new business owners don’t know to keep an eye out for.

When signing a commercial lease, check for the following:

• Names of the landlord and tenant, or business
• A comprehensive description of the property, such as address and the type of space it is
• Rent amount
• When rent is due
• Security deposit details
• The permitted use of the property
• Exclusivity clauses, which can be used to prevent competitors from renting in the same building
• Who is responsible for maintenance and repairs
• Are modifications allowed, who can make modifications, and who pays for them
• Who is responsible for paying the utilities, and how much are they
• Is insurance required for the space
• Can the tenant sublease the space
• Indemnity and liability clauses
• Under which conditions will the lease be terminated
• When the agreement expires or is up for renewal
• Dispute resolution method, such as arbitration or mediation
• Compliance with local zoning and business regulations

When your lease includes these items, you can sign knowing your legal rights are protected. If you notice one of these, or another issue that pertains to your business, is missing, you should ask if it can be added. A good commercial landlord should be amenable to adding fair lease terms.

What Should You Avoid in Commercial Lease Agreements?

There are also certain inclusions you should avoid when signing a commercial lease agreement. Some of these are already included in items that should be in a commercial lease agreement, but when improperly executed, may result in your inability to operate.

When looking over a commercial lease agreement, you should pay extra attention to the following:

• Are there hidden costs, like common area maintenance fees or insurance requirements?
• Is there a personal guarantee clause that could make you personally liable for rent?
• Is there an automatic renewal provision that can lock you into another term if unnoticed?
• Are there terms that outline how and when rent will increase?
• Are you responsible for maintenance and repairs?
• Is the landlord refusing an exclusivity clause that protects your business interests?
• Are there termination penalties or early exit fees?
• Will your business be zoned out of using the rental property for its intended uses?
• If you are a stall-rental business, like a barber shop or makeup technician, can you sublease to clients?
• Does the dispute resolution restrict you to arbitration?
• Can you place a sign that advertises your business?
• Will you, your clients, and your customers have a place to park?

How Do You Legally Protect Your Business?

Your top concern is protecting yourself and your business, but you may not know how. That is why you should speak with an attorney who understands Daytona Beach, FL, commercial lease agreements and how they can be used to hinder your business and unfairly favor the landlord.

Call Lankford Law Firm at 850-888-8992 to learn how to protect your business interests. If you need help reviewing a lease before you sign, give me a call. Together, we will ensure your legal bases are covered and prevent you from being taken advantage of.

I can also help you draft or modify a lease or create a sublease that protects both you and your landlord.