4 Red Flags in a Commercial Lease

Leasing: Liability or Asset?

Finding the right location can be a huge factor in the success of your small business. Likewise, so can finding the right landlord.

In an ideal world, the landlord-business relationship is always smooth. However we all know this is not how things always go! We get a lot of calls from small businesses having issues with their landlords. On the inverse, we get a lot of calls from landlords having issues with their small business tenants. These situations usually get very complicated and expensive, and in the end no one really wins. A good commercial lease can be an asset to both landlord and tenant alike.

Commercial Lease Red Flags

Fortunately a lot of that heartache and expense can be avoided by looking out for certain warning signs before getting into a lease. The idea behind this article is to share some basic leasing red flags with your small business. With any luck, we can save you some of the heartache we have seen small business’s experience.

1. Too Perfect– is your potential landlord a bit too eager? Is the price just too low when compared to the surrounding areas? If a deal looks too good to be true, it probably is.
• The Fix: Remember to do your research. Ask the landlord’s other tenants about their experiences. See if they have any reviews online. Check records to see about any legal trouble or liens.
2. Refuse to Write Anything– did your potential landlord make a lot of promises about the space that failed to make it on the commercial lease? A landlord refusing to put things in writing is a big red flag! Provisions in a lease are not valid unless they are in writing. A landlord could make a bevy of promises about ‘soon to be added’ improvements to a space, but unless you get it in writing your business has no legal recourse!
• The Fix: Get everything in writing!
3. The Forever Lease– a very long term lease is great for landlords, but much less flexible for small businesses. What if you decide to sell your business 2 years into a 10 year lease? What if you need to move to a bigger space? Or a smaller one?
• The Fix: If you must enter a long term lease, see if you can add in provisions for possible situations and/or a discount in rent.
4. The Confusing Lease– with the myriad of contract sites, many landlords think a template will suffice. Sadly, these ‘one size fits all’ legal sites rarely take into account local or regional laws, let alone the specifics of a space. If a commercial lease has lots of unclear terms, it could spell trouble down the road.
• The Fix: Make sure every aspect of a lease is spelled out clearly!

Final Thoughts

For more information on leases, please see our other articles:

• How to Negotiate Good Lease Terms
• Commercial Leases: Avoid Getting Screwed

Finding and negotiating the right space for your business is a stressful process. If you need a lawyer to help you draft, review or negotiate a commercial lease, we are more than happy to help you.

Law 4 Small Business. A little law now can save a lot later.