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5 Important Tips to Consider Before Signing a Commercial Lease

Finding an office space for a business is not at all an easy task; this is the reason that you sign the lease without enquiring much when you find a suitable office space for your business. But you need to understand that, no matter how friendly the prospective landlord seems to be, the lease will never be in favour of you.

“A landlord will be your friend only till you miss a rent payment or two.”

Even if you have thoroughly read the lease, it’s advised to have a legal advisor or an attorney to give it a second look, because lease is a document that’s written in a language which only a real estate professional can understand. So, before just diving in, know the depth of it and thoroughly understand the lease before signing.

Here are a few important tips to consider before signing a commercial lease.

1. Check how the lease payment is calculated

We all know that, the basic equation to calculate the lease payment is number of sq. ft. times the cost per sq. ft. For instance, if you are leasing an office space of 1000 sq. ft., and the cost per sq. ft. is RS 48, the monthly rent would be RS 48,000.

Sometimes the rent may include parking charges as well. Of course, most of the office spaces provide free parking facilities, but there are a few office spaces whose parking charges are also included in the monthly rent. So make sure you know the exact amount you need to pay before signing the lease.

2. Know what you’re paying for

It’s really important for you to know what are the things covered in your payment, and what expenses the landlord would cover. Sometimes, the landlords project it as you don’t have to pay any extra amount other than the rent. Later, there arises the responsibility of paying for utilities, common area maintenance, and so on.

Make sure you know who’s responsible for the payment of janitorial service, and who has to pay for the repairs if anything goes wrong! Is it the landlord or you? Most probably it’s you, but it’s good to know it ahead of time.

3. Ask if rent can go up any time

One important clause that every tenant must know is the escalation clause. Most of the commercial leases contain this escalation clause which permits landlords to pass on the operating expenses to the tenants. If your lease also contains this clause, you should know how much would be the approximate rise, and what those extra expenses are. See if the increase in rent makes sense and make sure you’re not paying an extra amount unnecessarily.

4. Check if the rent increases every year

As a tenant you must know if the rent increases every year; if yes, you must know approximate rate of increment. It’s common that the rent increases as the value of the property increases. This is why most of the leases include a rent increase on the anniversary date of lease.

Some leases have a special clause saying that if the landlord can rent the space for more than what you agreed to pay sometime back, he/she holds all the rights to increase the rent. Negotiate on the rent and timelines, fix an amount and then sign the lease.

5. Be very clear on every point in the lease

Finally, make sure you are clear on each and every point mentioned in the lease. May it be the amount of space you’re leasing, day of month for the rent due, extra payment if you are late, what are the extra costs, who’s responsible for maintenance and repairs, what are the common areas you’ll have access to and so on. Know them all.

These are a few important tips that every tenant has to consider before signing a commercial lease. Having an experienced commercial real estate agent by your side at the time of lease is always a plus, as they know the terms and clauses better and they can surely help you attain an upper edge in the deal.

Fortuneprops is one such property management and advisory firm having significant experience in the field. Contact us for any assistance on commercial real estate deals; we’ll make it worthy.

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