Attorneys at Gray Law Group are often asked to review leases for Landlords and Tenants. But there are some important things to know when entering into a lease agreement for a business.
First, there are always two parties to a lease. As simple as that sounds, remember that a Lease is nothing more than an agreement between two business partners – it is a contract. And it takes two parties to agree to the terms. This means that:
There is room to negotiate, and
There may be different interpretations of the same language.
Therefore, Lease agreements must be clear and easy to read in order to avoid confusion. Prospective Tenants should know that they do not have to sign any lease that is handed to them by the landlord. It is customary for a Tenant to review the lease and propose changes – Changes in price, length and obligations of the parties.
Second, a lease for a business often includes extra charges for Common Area Maintenance (“CAM”). CAM charges can be very controversial, and expensive. Both parties must have a good understanding of what, exactly, the CAM charges are and how they can fluctuate up and down. For example, taxes may be part of CAM charges. But taxes may significantly change during a lease. Building repairs, such as a parking lot or roof, may be part of CAM charges and both of them are very expensive to replace.
Tenants must be very careful in understanding how these charges can go up or down. In fact, sometimes they may want to “cap” the CAM charges in their negotiations. Alternatively, they may want to shift responsibility from the Tenant to the Landlord to pay for certain items such as a roof or a parking lot.
Third, there is no “standard lease” for retail, business or office space. They vary significantly depending on the circumstances. Indeed, there is no “one-size-fits-all” when it comes to setting forth the rights and obligations of the parties to a business lease.
Therefore, Landlords and Tenants should read their leases carefully with their lawyer to see opportunities to negotiate with the other party.
If you have questions about any of these issues, contact us for a free consultation.
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