Commercial Real Estate Leases: Important Terms You Need to Know
If your business is about to enter into a commercial lease, you’ll need the help of a knowledgeable attorney to ensure the process goes smoothly. While your lawyer will understand each clause of your lease, you need to understand them too. After all, you’re the one who will be using the space.
Below are definitions for three important clauses. For more detailed information, schedule a consultation with the commercial real estate attorneys at Spivey, Pope, Green & Greer.
Parties Clause
The parties clause seems simple at first, but it requires close attention from you and your attorney. This clause lists the parties of the commercial lease agreement: your business and the landlord (or the landlord’s business). These parties can be called “landlord and tenant” or “lessor and lessee,” with your landlord being the lessor and your company being the lessee.
It is crucial that your business name and your landlord’s name are correct in this clause. If your personal name is on the lease, you will personally be held liable under the lease. Make sure your business’ full legal name is spelled out in this section. If you’re an LLC, “Business Name, LLC” should be the name on the lease. The same goes for other forms of business structures.
Description of the Premises Clause
This clause outlines what exactly you are leasing. If you’re leasing an entire building, a simple address will suffice. If your lease includes additional buildings or lots, these should be listed too. The premises clause becomes incredibly important when you’re leasing a portion of a building.
The clause will describe in detail the space you are leasing, including any shared spaces such as storage rooms, conference rooms, and parking. Your attorney will help ensure the language is precise and that it encompasses the correct space.
Rent Clause
The rent clause is one of the most important clauses in your lease. Your attorney will help you negotiate rent, as well as factors such as:
- The amount of the landlord’s operating costs that will be passed on to you
- Automatic rent increases
- Tenant improvement deductions, which could decrease your rent for improvements you make to the space
- How to deal with unanticipated issues or increases
Other important clauses your lawyer will ensure you understand include:
- Use and exclusives clauses
- Term clause
- Improvements and alterations
- Maintenance
- Insurance
- Security deposit
Leases can be complicated and include many more clauses than what is covered in this post. For help with your commercial real estate lease, contact SPGG today.