In today's Freedom Friday blog and email newsletter, I'm continuing to talk about a topic that is related somewhat to last week's blog article.  In last week's Freedom Friday blog and email newsletter, I discussed the basics of business contracts.  In today's Freedom Friday blog and email newsletter, I want to talk about a specific type of business contract encountered by many small business owners, and that is commercial leases.  In today's Freedom Friday blog and email newsletter, I'm talking about the basics of commercial leases in 2024.

As a law firm that represents small business owners, this is an area in which I get to see both sides.  While some of my clients come to me to review the terms of a commercial lease (as a proposed tenant), I also have represented landlords in the enforcement of their leases.  A commercial lease agreement is more complex and sophisticated than a residential lease for an apartment or a house.   Here are four (4) key issues regarding commercial lease agreements:

1.  Commercial Leases are Custom Agreements

The first key issue regarding commercial lease agreements is that commercial leases are custom arrangements; they are not standard like you usually see for an apartment or residential lease for a house.  Unlike apartment or residential home leases, commercial leases tend to be more custom, and unless the landlord has multiple or larger properties, many commercial leases are created from scratch with the assistance of business lawyers, and so from the landlord's perspective, a custom commercial lease should have a business lawyer involved to protect the interests of the landlord.  A tenant for a commercial lease should also work with a business attorney to protect their interests if important changes need to be made, or to negotiate their interests.

2.  Alterations to the Leased Space

The second key issue regarding commercial lease agreements is whether alterations are allowed to the lease space.  In some commercial leases, for example, if a small business is leasing a small (or mid-size) executive office suite, alterations or changes to the actual leased space are usually not allowed.  However, in some commercial leases for larger and more customized spaces, sometimes the tenant will want to make alterations to the leased space.  The lease needs to be very clear about what alterations or changes to the leased space are allowed, and which would be prohibited.

3.  Commercial Leases May Include Other Services

The third key issue regarding commercial lease agreements is that commercial leases may include other services besides the leased space itself.  This can go both ways, but if you're leasing an executive office suite, some of those are furnished, and some are not.  Some leases only include the space, but some may also include utility services, or other services, including electricity, telephone service, and/or Internet.  Also, many leases include a provision for CAM expense, which is an abbreviation for Common Area Maintenance.  CAM expense is essentially a pro-rated charge to the tenant for maintenance or janitorial service of common areas in the building, such as shared restrooms, kitchenettes, and/or break rooms.

4.  Default Terms

The fourth key issue regarding commercial lease agreements is the terms, if any, for locking out the tenant from the space being leased; in other words, what the default provisions are of the lease.  Many tenants do not pay their rent as agreed, either due to financial troubles within their own businesses, or because they become unhappy with the condition of the premises.  Any terms for locking out the tenant because they default on the lease agreement must be clearly outlined in the lease agreement.  Either way, a landlord needs a good business attorney to help them protect their interests in case of a default by a tenant, and a small business tenant needs a good business attorney to make sure the lease includes terms for the tenant to justifiably end the agreement.

Thinking about starting a small business?  Or maybe your small business is having issues with contracts, leases, business partners, collection issues, or experiencing other barriers to growth?  Please contact me at [email protected] to schedule a FREE strategy session.

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