Understanding Commercial Leases
Before you rent space for your business, be sure you understand these basic facts about commercial leases.
Renting commercial space is a big responsibility -- the success or failure of your business may ride on certain terms of the lease. Before you approach a landlord, you should understand how commercial leases differ from the more common residential variety. And before you sign anything, make sure you understand and agree with the basic terms of the lease, such as the amount of rent, the length of the lease and the configuration of the physical space.
How Commercial Leases Differ From Residential Leases
It's crucial to understand from the get-go that, practically and legally speaking, commercial leases and residential leases are quite different. Here are the main distinctions between them:
- Fewer consumer protection laws. Commercial leases are not subject to most consumer protection laws that govern residential leases -- for example, there are no caps on security deposits or rules protecting a tenant's privacy.
- No standard forms. Many commercial leases are not based on a standard form or agreement; each commercial lease is customized to the landlord's needs. As a result, you need to carefully examine every commercial lease agreement offered to you.
- Long-term and binding. You cannot easily break or change a commercial lease. It is a legally binding contract, and a good deal of money is usually at stake.
- Negotiability and flexibility. Commercial leases are generally subject to much more negotiation between the business owners and the landlord, since businesses often need special features in their spaces, and landlords are often eager for tenants and willing to extend special offers. (For information on negotiating the terms of your lease, see Negotiating the Best Commercial Lease Terms.)
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