Primary Types of Clauses in a Commercial Lease

Commercial retail space

Commercial retail spaceThe key element when starting or running a business is the type of office space you get for your venture. Most business owners will assume that this is as easy as identifying the ideal area for your business then signing a few forms to rent it. This is, however, a complex world filled with a language of its own. The landlord in your case will naturally have the upper hand in the negotiation of your commercial lease since he or she has already done it numerous times.

Without a tenant representation broker from Utah to guide you, it is extremely easy to make a mistake with your lease, which will result in your business’ downfall. This broker will not only help you negotiate favorable terms for your commercial contract but will also help you find an ideal spot for your business. One of the key elements that he or she will help you navigate are the clauses included in your lease. The following are the types of clauses contained in commercial leases:

Escalation and Rent Clauses

The base rent you will be required to pay within your initial year is included in the rent clause, but this is generally only a starting point. The escalation clause will set the guidelines for the periodical increment of your rent. The landlord will be exposed to rising rental and inflation rates in a highly volatile market. The escalation clause in a commercial lease is designed to keep the rent that you will be charged at the market level without having to renegotiate your contract annually.

Renewal Clauses

Landlord giving the keyThese clauses seem like they benefit your landlord but in essence favor you. A renewal clause gives you a right to extend your lease on pre-negotiated bases and an alternative of opting out after the lease’s initial term. Seven-, ten-, and five-year renewal terms are the common ones used in commercial leases. However, you might be at a disadvantage if the contract is signed. When the rental market has high rental rates but with a tenant representation broker, you will get optimal rates.

Subletting and Assignment Clauses

If your commercial space does not work for you, you have the option of subletting it if you have a subletting clause include in your lease. An assignment clause, on the other hand, allows you to walk away and give up on the contract wholly if the space does not work for your operation. However, this will work only if the landlord can find another tenant to take up the space you vacate.

The Right of First Refusal Clause

This clause requires a landlord to offer you any current vacant space on the premises first before he or she provides it to the general public. This will benefit you if you want additional space to expand your venture. This is because it prevents the landlord from getting new tenants who would sometimes set up a new business to compete with your business.

The clauses mentioned above might not be included in a lease in such clear wording. Therefore, it is easy to misunderstand them. The fee spent on hiring a tenant representative is minimal, but it makes the difference between you being a frustrated and happy commercial tenant.