Why are well-negotiated commercial leases important?

When owning a business, it is often important to rent out a space in which to do said business. Though buying also remains an option, it is much more expensive, so short-term leases remain the most common and popular way to get a business space.

However, commercial leases differ greatly from residential leases, leading to inexperienced business owners making many mistakes along the way. A poorly negotiated lease could potentially sink a business, which is why doing it right is so crucial.

Differences in commercial vs. residential leases

Forbes offers tips for creating a strong commercial lease. The first thing they point out is that commercial leases differ from residential ones in four main ways. Commercial leases often have fewer protections, longer terms, more flexibility, and a lack of standardized forms.

Business owners should expect to pay more for commercial leases and go into the deal knowing that it will last 3-5 years and cost more to break the lease. Since commercial leases depend so heavily on the parties involved, it is easier to negotiate and come up with unique agreements. At the same time, commercial leases offer fewer protections regarding matters like a tenant’s rights to privacy or security deposit caps.

Tailoring a lease well

It is always important to make sure a lease fits a business before agreeing, too. Consider taxes, maintenance costs, security deposit terms, who pays to maintain the premise, if alterations to the building are allowable, if signs for business are allowed, if subleasing is okay in case the business fails, who can terminate the contract under what circumstances, and who pays for building modifications.

In coming to a clear and defined agreement, it is possible to build a lease that can help a business grow.