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Common Issues With Commercial Leases

On Behalf of | Oct 22, 2018 | Firm News

When it comes to navigating any type of lease, there are many pitfalls to avoid. Commercial leases, in particular, are complex legal documents prone to a variety of mistakes. If you are looking to create a solid commercial lease, be sure you have the help of an experienced NYC real estate lawyer on your side. A lease will act as an important agreement between the building owner or manager and the tenant. Adding to the complexity of commercial leasing is the fact that this lease type is far less regulated than residential leases. If you are looking for help with understanding how to create the idea commercial lease for your property, we are here to help. Read on to learn what common issues arise with commercial leases and contact us for assistance.

#1: An Unclear Understanding Of Tenant Maintenance Responsibilities

One major area that many commercial leases neglect to outline in detail is the area of maintenance and the responsibilities of the tenant versus the building owner. In some cases, a lease lightly touches on the topic without addressing it in detail, which can lead to a slew of misunderstandings. In other situations, the topic isn’t handled at all, which proves to be even more confusing for both parties.

Make sure that your commercial lease includes an in-depth description of how maintenance will be handled and who specifically is responsible for different types of maintenance tasks. For example, as the building owner, you will likely take on responsibility for the big picture maintenance items, such as roof repairs, parking lot maintenance, and other tasks that involve the whole property. You might require your tenants, though, to handle smaller maintenance tasks, such as replacing light bulbs or replacing air filters.

However you decide to handle maintenance, be sure it is clearly outlined in the lease to prevent confusion. This can save you countless headaches and can ensure that your tenant understands their responsibilities fully. It is also helpful to include any relevant contact information in the case of emergency maintenance needs.

#2: No Specification On Whether Rent Is Fixed For The Lease Term

A big factor in commercial leasing is whether or not the rent is going to stay at a fixed amount for the duration of the lease term or if it is subject to rate increases at specific increments of time. Because most commercial leases extend much longer than a residential lease does, it is not uncommon for rental rate increases to occur during the lease term.

Make sure that if you are going to implement rate increases down the road, you have outlined this information in the lease. This can help ensure that when you do increase the rent rate, you have a document to point back to if you get pushback from your tenants.

#3: A Lack Of Information About Subletting Options

Ideally, your tenants will finish out the entire duration of their lease. However, circumstances do arise in which a tenant cannot fulfill their entire lease. If this is the case, make sure you have information about subletting included in your commercial lease. Cover everything from the basics, such as whether or not you allow subletting, and detailed information about how the process will be handled if you do. For example, will the tenant be responsible for finding a subletter or will you advertise the property for them while holding them responsible for rent until a new party is found to take over the lease?

Be sure the commercial lease includes clear information about subletting to prevent any headaches down the road. In many cases, landlords opt to disallow subletting to create one less complication.

#4: Not Addressing The Issue Of Modifications To The Space

Depending on the commercial space you are renting and what type of businesses your tenants run, you may need to have specific language in your lease about space modifications. Will you allow your tenants to modify the space they are renting? If so, how much can they modify and what responsibility to they have to turn the space back into its original state at the end of their lease?

Make sure you clearly outline what modifications are and aren’t allowed on your property. This will ensure that you don’t show up one day and find out that your once pristine office space has been renovated to become a hair salon. Allowing modifications can increase your rental pool, but be sure those modifications are regulated through your lease.

#5: Trying To Create A Lease Without Legal Help

While the internet boasts many easy lease creation programs, the reality is that without the help of a lawyer, you risk making mistakes in your commercial lease. A one-size-fits-all lease will lack specific coverage details that your building might need. It is always wise to sit down with a real estate lawyer to gain more knowledge about important aspects to include in your lease. Factors, such as your building type, the way the property will be used, the length of your lease, and other details will play a vital role in determining what kind of commercial lease is right for you.

If you are in need of help with creating a quality commercial lease, we invite you to reach out to our NYC real estate lawyers. We can work with you to ensure you cover every base and that your lease sets you and your tenant up for clear communication. Contact us today for a free consultation and we will get to work outlining exactly how we can help.