In today's Freedom Friday blog and email newsletter, I want to talk about a topic that I probably should get asked more about than I actually do.  In fact, this past week, a client came to me about an asset purchase agreement but mentioned also a lease that would be involved once he purchased a business.  Any time you are going to sign a business lease, you should always ask an attorney to review it for you, to make sure there are no red flags, or if there are red flags, how to address them.  So, in today's Freedom Friday blog, I'm talking about “Let the Buyer (Lessee) Beware – Red Flags in a Business Lease”.

In any business, there are four different types of “red flags” which are cause for concern.  These are the different types of clauses you and your business attorney need to watch out for before signing a new lease for your business:

1. Hidden Costs

The first type of “red flag” to watch out for in a business lease is hidden costs.  There are several different types of hidden costs, but these can include rent escalation, expense stops, tenant improvement allowances, and sublease clauses.  The major issues here are rising rent costs and using a general “base year” to calculate your operating expenses instead of using the actual figure. 

2.  Terms of Renewal

The second type of “red flag” to watch out for in a business lease is the terms of renewal.  Not only are there qualification issues when renewing the lease, but also your rent could (and likely will) go up.  There is also usually a window of time when you must notify the landlord you wish to renew the lease (sometimes as much as 30 days), and so you don't want to lose the opportunity of renewing the lease when you wish to do so.

3.  Lease Termination

The third type of “red flag” to watch out for in a business lease relates to terminating the lease.  You want to be aware of anything which may allow the landlord to cancel the lease, which could be anything from eminent domain to finding a better tenant.  You also want to look for how you can terminate the lease and watch out for any early termination penalties.

4.  Insurance

The fourth type of “red flag” to watch out for in a business lease relates to any terms requiring insurance on the part of the tenant.  A business lease should always specify which parties are responsible for damage to which parts of the property.  It's very common for the landlord to be responsible for the exterior and common areas, but not responsible for the interior.  Even if the lease doesn't require you as the tenant to carry an insurance policy, you should always consider obtaining commercial general liability insurance for your small business.

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.

For more information about Liberty Legal Solutions, LLC, please visit our website at www.libertylegalok.com.