Common Commercial Lease Terms
Understand the meaning of the landlord’s lease clauses before you negotiate.
Once you’ve found suitable commercial real estate and you and the landlord have agreed on the key features of the lease, such as how much rent you’ll pay and how long the lease will run, it’s time to formally spell out your deal in a binding, written lease. Most important? Head into the lease negotiations understanding the meaning of the landlord’s lease clauses. A thorough understanding of common commercial lease clauses will help you avoid hidden, onerous traps. It will also help you bargain for modifications in your favor.
The list below introduces you to the most common lease clauses.
Parties
Leases generally begin by naming the landlord and the tenant, in a clause entitled “Parties.” Or, the clause may be entitled “Landlord and Tenant,” or “Lessor and Lessee” (the landlord is the lessor and the tenant is the lessee). Although you might not think so at first, it’s important to look at these names carefully. For example, if you are a corporation or an LLC, you’ll want to make sure that your name on the lease is your legal name, such as “Able Investments, LLC,” or “Macro Industries, Inc.” An error in the way you or the landlord is identified can have serious repercussions. If you are an LLC or corporation and you list your personal, not corporate name, you may become personally responsible under the lease (avoiding personal liability is probably one of the reasons you incorporated your business or became an LLC).
Premises Clause
Somewhere near the beginning of your lease, often right after the Parties clause, you’ll see a clause that identifies the space that you’ll be occupying. This clause is often titled “Premises.” If you’re leasing an entire building, the clause should simply give the street address (and should describe any outbuildings or lots that come with it). If you’re leasing less than an entire building, you and the landlord need to describe the space more precisely. In particular, if you will have access to storage rooms, conference rooms, parking, kitchen facilities, and the like, you should spell this out.
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