Starting a new business can be incredibly exciting. Entrepreneurs spend weeks, even months, hunting for facilities and equipment that are just right for their businesses. Typically, this involves pouring over every tiny detail of the building’s layout and amenities, thinking carefully about how it might impact operations or make the customer experience better. Once a startup finds that perfect space and a landlord willing to rent it out, it’s easy to be tempted into signing a commercial lease right away. However, executing a commercial lease is a much more complicated and nuanced endeavor than entering into a typical residential rental agreement. As a result, it’s critical to work with a skilled real estate lawyer when working out the terms of a commercial lease.
Entrepreneurs are savvy, and by the time a commercial lease is ready to be executed they have typically already worked hard to hash out the details of monthly rent, lease term, and other conditions. Business owners may be more than willing to trust the building landlord, their business partners and other stakeholders, and their real estate agents – all whom are telling them that the lease looks good. And as any good businessperson knows, time is money; the quicker a commercial lease gets signed, the faster entrepreneurs can get back to what they do best: building or expanding their businesses. Despite the outward inconvenience of yet another step in the commercial leasing process, signing a lease without having it reviewed by a real estate lawyer could end up being one of the most significant mistakes a new business owner makes when executing a commercial lease.
Commercial Lease Agreements are Complex
At first blush, many commercial leases look just about the same as the residential leases most of us have skimmed and autographed several times over the years. They’re made up of pages upon pages of terms, provisions, and seemingly unlikely and obscure legal qualifiers. And while an untrained eye may skip over a critical term or condition, a good real estate lawyer has the skills and training to know exactly what to look for in a fair commercial lease.
Though it may look like an ordinary lease that is fair to both parties, a commercial lease agreement often includes terms that will directly impact the operation of the lessee-business, often in a manner that will benefit the landlord at the expense of the tenant. Indeed, commercial lease agreements are most often drafted by the building’s landlord – the entity that stands to gain the most by excluding as many of your business’s rights and privileges from the bargain as possible. A real estate lawyer can identify, explain, and interpret common provisions that may seem innocuous, but will ultimately become a headache. Even more important, good advice from a local real estate lawyer can help a new business avoid a potential money pit, which would only incur unnecessary legal and financial liability for tenants.
Real Estate Layers Level Uneven Playing Fields in Commercial Leases
Real estate lawyers help commercial lessees set themselves up for success by helping them land a fair deal on their rental from the onset. A lease is a binding contract and may be challenging and expensive to change. Some commercial leases last for decades, and it is in every entrepreneurs best interest to bargain shrewdly before executing any real estate agreement. Often, landlords will negotiate expenses like utilities, maintenance costs, taxes, and security deposits in exchange for a longer lease term for a commercial rental. Though savings on monthly costs may seem like a good idea at the time, the fine-print lease terms may spell disaster.
Unlike residential leases, commercial leases are rarely standardized. The terms of a commercial rental are negotiated and customized based on the individual tenant. A real estate lawyer can serve as your representative during the negotiation process in addition to reviewing a proposed lease agreement prior to signing. A real estate lawyer may even bring a degree of professionalism – if not outright authority – to the bargaining table. By bringing a real estate lawyer with you to a commercial real estate negotiation, landlords may be pressured to offer fairer and more transparent lease terms than if they were working with you as the tenant alone.
During any contract negotiation, it is incredibly helpful to have an impartial and disciplined advocate who does not let emotional reactions or attachments influence business decisions. When it’s the business you’ve dreamed up and raised from the ground at stake, this type of neutral ally in the decision-making process is invaluable. By employing a real estate lawyer to help negotiate commercial lease terms, businesses are more likely to settle on terms that favorable for the company as a tenant, which may prove to be an essential element in the long-term success of the business.
Commercial lease agreements prepared by prospective landlords often include legal terms that are unfavorable to prospective tenants. For example, landlords commonly include terms in commercial leases regarding confession of judgment, which state that a tenant preemptively accepts liability for potential conflicts down the road. Landlords also commonly include requirements for future common area maintenance, repairs and improvements, terms governing procedures in the event of a breach of contract by either party, insurance requirements, releases of liability, acceleration of rent, and other terms that can seriously impact a business’s legal and financial liability. In fact, a commercial lease agreement can include almost any provision a landlord concocts.
A real estate lawyer is an advocate responsible for looking after the best interests of his or her clients. He or she can explain lease terms and conditions in a common-sense way and help you understand the very real impact those terms may have on your business operations. It may be counterintuitive to think that paying an attorney to review a lease will save you money, but that is quite often the case.
Hiring a Good Real Estate Lawyer for Your Commercial Lease
Hiring a real estate lawyer to look over a commercial lease for your business is a matter of basic due diligence. When hiring a real estate lawyer, there are a number of steps a business can take to get the most out of the relationship. When communicating with a potential real estate lawyer near you, make your needs are clear from the beginning. Do you need to be able to significantly modify the space you will be using? Would you prefer to make your own repairs and improvements in exchange for reduced rent? Are you wary about the length of the lease? It’s wise to consider what’s important to you and your business before entering into an attorney-client relationship.
Good advice from a local real estate lawyer will save your business the time and expense of unforeseen challenges, which often arise in times of transition. Most often issues with lease agreements don’t come to the surface until after the lease is signed, when it is much more difficult to change lease terms than before the contract was entered. Given the myriad of other issues that are likely to be on a new entrepreneur’s mind as he or she settles into a new business space, it is well worth the trouble to hire a real estate attorney. Someone trained to decipher legal terminology in commercial leases will help make sure you understand what you and your business are getting into before you seal the deal.
