Commercial Leases - What You Need to Know Part II

consider parking when leasing a building

Continuing on with the commercial leasing series, we are now continuing our checklist of items to know when you are leasing a commercial property or considering a lease. 

3. Parking

This topic can be essential and elusive.  An item that some make assumptions on is the availability of assigned spots, pre-determined parking areas and the landlords ability to police the poachers. Also, find out what regulatory agencies you have to go through to make any changes to the parking lot. You will need to obtain the right permit or multiple permits from different government agencies. 

4. Givens that are not givens

Many times we may presume that some of the “basics” are naturally included or addressed before you move in. Do not be fooled. Ask these basic questions.

  • Who provides what maintenance and how often?
  • What may be the response time for repairs/maintenance?
  • Who pays for what operating expenses for services and how often?
  • Who pays for grounds expenses, how often and at what quality level?
  • Plumbing on whose “nickel?” Janitorial and trash?
  • If your landlord is supposed to provide maintenance services and if… he/she/it does not, what are your remedies?
  • Does your location have sufficient water/plumbing, power and a sufficient number of outlets for your particular needs?
  • Are there sufficient cable/ether/internet/cabling/telephone/data connectivity for your needs?
  • Did you remember that some areas/buildings still do not have sufficient cellular telephone reception without distortion? Some carriers' service is better than others in different locations. This can be HUGE! The landlord (lessor) may have a realtor talk to you. Do not assume that the realtor has any part of your interest in mind and do not assume that none of your payments will go to the landlord’s realtor.
  • Has the previous tenant moved out and is the location clean and ready for you to move in?
  • What does the lease agreement say if the prior tenant has yet to move out?
  • How much noise can you make?
  • Can you hammer nails into the walls? Can you install a firing range?
  • Do you have/want the right to renew the lease at the end of the given term? Is the pricing method for the renewal fair/reasonable for you?
  • Does the landlord require a security deposit and truly what does is “secure”? There can be differences in what a security deposit can “secure” and there can be differences between typical leases and leases that exceed five acres.
  • Oh yea, (A legal expression) is your banker on board with you on the lease?
  • Exactly how much are you paying to whom, when and where? How punitive are your late fees?

If your cash flow significantly varies, you may want to pay closer attention to such a provision that you may imagine. Many commercial leases like to refer to “attachments” or “exhibits” that are merely appended. (Whoa. Big word again. Means attached) These attachments can be slippery because they are actually as much a part of the lease agreement to which you are bound as the text of the lease agreement. READ THEM! Does the lease suggest that you pledge your accounts receivables or other assets as collateral to protect for future rent payments? This can be dangerous as it may interfere with your line of credit or other financial institution loans.

Next time we will dive into neighbors and insurance as they pertain to commercial leasing agreements.