Before Signing a Commercial Lease

Hire a lawyer
This is one expense you can’t afford not to incur. And do it BEFORE you sign the lease, not after!

Square feet
Most commercial leases are quoted per square foot of space per year, rather than an overall amount per month. Bring you own measuring tape, and don’t pay for space like common hallways that you cannot use.

Commercial leases are different from residential leases
Landlord and tenant Acts have a lot of protections for tenants in residential situations. These laws generally do not apply to commercial leases. For example a Landlord can lock your building and hold your assets in the case of non payment of rent. This is not generally allowed with a residential property.

Term of the lease
Commercial leases may have terms of up to 10 years. In addition it may be impossible, or very difficult to “get out” of the lease. You may not want to sign a lease for more than 3 years to begin with, but make sure you do have an option to renew. Future rent increases should also be in writing. Try to have some ability to terminate the lease early, although there will often be a three month penalty clause for doing so.

Rent increases
Most leases will have an escalation clause, and may also include a provision for the landlord to pass on any increases in taxes,  and costs of operation.

Who IS your landlord? 
Know the name of the owner and where they are located. An owner in a foreign country will be less responsive to requests for maintenance than one who is next door. If the lease is in a corporate name, find out who owns the corporation. Ask other tenants about the landlord.

Damage deposit
Find out if there is a damage deposit and how much it is. Does the amount earn interest? Be sure all repairs are made before moving in, and any damages are noted.

Leasehold improvements
Most leases have a clause that “all leasehold improvements become the property of the landlord” or “the premises must be returned to their original condition.”
This can be very expensive if you decide to move.

Escape clause
Be sure the lease contains an “escape clause” releasing you from your obligations should you die, become disabled, lose your license, or if the city changes the zoning.

What is included? 
Make sure you know what is, and is not included and in the rental payments. For example, who pays for maintenance, snow removal, grass cutting, garbage, heating and AC equipment?

Hours
What are the normal hours of operation? Can you see patients at non-traditional times? Will there be heat, AC and security?

Signage
What kind of signs will the landlord allow? Must they follow a certain size and style? Who pays?

Insurance
What insurance is provided by the landlord, and what insurance will the landlord require you to carry?

Common area repairs
Will the landlord maintain the common areas? Will the landlord provide new paint and carpets on a regular basis?

Unfit for occupancy
Most leases have a clause to terminate the rent due to reconstruction following storm damage, but you may want to include other loss of use such as heating or air conditioning failure when you are not able to see patients.

Subletting
Does the lease allow you to sublet your space? Do the terms restrict subletting to certain types of businesses? What protection do you have against “undesirable” businesses opening next door?

Option for first refusal
If your business expands you will want a clause giving you right of first refusal to any additional space that becomes available.