Considerations to make before signing a commercial lease

Nov 15, 2016

When you find the perfect location for your business, you’ll have found a place to collaborate and grow. It’s an exciting time whether you’re a startup or simply expanding. If you are not in the position to purchase a building or space, you will need to sign a commercial lease with a landlord. Your commercial lease is a legally binding contract and a large expense for your business, you will want to have your business lawyer review and advise before signing a commercial lease.

To begin to understand the legal terms and conditions of your commercial lease,  consider the following below.

The type of lease – how your rent is calculated

There are a number of ways in which the rent you owe each month can be calculate, the type of lease you sign off on will determine this. Your rent is generally determined by the square footage cost of the space, the types of lease you might be under include:

• Net Lease or Triple Net Lease – This type of lease requires you to pay your rent and TMI. TMI refers to taxes, maintaince fees and insurance. 
• Gross Lease – This type of lease is a common office space lease, the landlord covers building operating costs, you pay a fixed monthly amount.
• Percentage Leases – You pay a percentage of your income, as well, as a fixed rate.

The duration of your commercial lease

Your lease document will outline when your lease begins and ends, this will include your move in date and any renovations that need to occur to the space prior to move-in. Typical commercial leases start at 3 years and can extend past 10 years. Your lease should also include a sub-leasing agreement, in the case that you need to move locations or expand.

Rent increases and renewals

Many leases will include an escalation clause to address rent increases over the duration of your lease. As the cost of doing business and operating the space increases landlords want to ensure that your rent is adjusted accordingly. This clause is often negotiable.

You may also want to negotiate a renewal clause, in case your business wants first rights to renew the lease for a new term. There are many questions you will need to consider within your negotiation of a renewal clause.

There are different options for when you sign a lease, your Niagara Business lawyer will advise you on the best scenario for your business, they will also guide you through any clauses or costs that might affect your business before you sign your lease. Connect with one of the St. Catharines lawyers from Chown Cairns business practice group, to hire a trusted advisor for your business assets.