10 Reasons to Work with a Lawyer When Negotiating a Commercial Lease
While businesses are continuing to close due to the lingering economic impacts of the COVID-19 pandemic, many entrepreneurs are seizing the opportunity to launch new businesses, and many established businesses are taking advantage of vacancies to relocate or expand. When negotiating commercial leases, business owners need to make informed decisions—and this goes well beyond negotiating rent, square footage and the initial term (or duration) of the lease agreement.
Too often, business owners sign their commercial lease agreements “as is,” or they rely on their brokers to seek some basic concessions on their behalf. But, to make informed decisions about their commercial lease terms, business owners need to rely on the advice of experienced counsel.
Prospective Commercial Tenants Need Experienced Legal Representation—Here’s Why
A commercial lease is a binding contract that has significant legal and financial implications—and in many cases, these implications can extend well past the expiration of the lease term. With this in mind, here are 10 reasons to work with a lawyer when negotiating a commercial real estate lease in Florida:
1. Commercial Leases Are Almost Always Heavily One-Sided
Since most commercial leases are drafted by the property owner’s legal counsel, they are almost always heavily one-sided in favor of the lessor. To secure reasonable lease terms, prospective lessees need to negotiate. This applies to all terms of the lease, from the lessee’s financial obligations to the apportionment of responsibility for legal compliance between the parties.
2. Most Commercial Lessors Have Legal Counsel
Not only do most commercial lessors retain legal counsel to draft their leases, but they engage counsel to negotiate their leases as well. As a result, as a prospective lessee, hiring an experienced lawyer simply levels the playing field.
3. Commercial Lease Terms Should Reflect Current Market Standards
A lawyer who regularly negotiates commercial leases will be familiar with the current market standards and will be able to ensure that your commercial lease reflects these standards, as warranted. This applies not only to market rates for rent, common area maintenance (CAM) charges and other expenses but to market standards regarding liability limitations, indemnification obligations, insurance requirements, damages caps and other key legal matters as well.
4. Commercial Leases Can Burden Lessees with Unknown Expenses
To protect themselves, commercial lessors will often try to build as much flexibility into their leases as possible. With many leases, this includes the flexibility to increase lessees’ financial obligations over time. An experienced commercial real estate lawyer will be able to help you identify these provisions, assess their implications, evaluate potential alternatives and negotiate for a more equitable agreement on your business’s behalf.
5. Tenants Need to Secure Adequate Build-Out and Remodeling Rights
Commercial tenants need the ability to build out their leased premises to suit their business’s needs. This is true whether the lease is for a retail location, office space, warehouse or industrial facility. Tenants also need the flexibility to make changes as their businesses’ needs and brand identities change over time. Commercial lessors typically try to maintain as much control over the use and modification of their premises as possible, so this is an area that requires forward-thinking and strategic negotiation as well.
6. Tenants Need to Mitigate Their Liability During the Lease Term
Frequently, commercial leases will provide that the lessee is liable for any and all losses or damages arising in connection with the leased premises during the lease term. This is unreasonable, as there are several aspects of leased premises’ condition and safety that are typically beyond the lessee’s control. When negotiating a commercial lease, the lessee’s counsel will generally seek to limit the lessee’s liability exposure to matters that are within the lessee’s control—and exclude matters such as electrical issues and construction defects that existed before the lease’s effective date.
7. Tenants Need to Mitigate Their Liability Post-Termination
Standard commercial leases include several post-termination obligations for lessees. This generally includes liability for future rent and expenses in the event of early termination—often even if the lessee terminates the lease for cause. While commercial tenants should expect to be subject to reasonable obligations at the end of the lease term, they should also work with their counsel to ensure that they are not unnecessarily and unreasonably exposed to future liability.
8. All Contingent Rights Should Be Subject to Reasonable Conditions
Commercial lessees will typically have certain contingent rights that are subject to the lessor’s approval. Renewal and transfer rights are two common examples. When negotiating a commercial lease, it is important to ensure that the conditions of your business’s contingent rights are reasonable. In many cases, lessors’ standard terms will essentially give them discretion over whether to approve a renewal or transfer, and this is something that lessees can—and generally should—avoid.
9. The “Boilerplate” Terms Matter
When negotiating a commercial lease, the “boilerplate” terms matter. In fact, in many respects, these are among the most important provisions in the entire agreement. From making sure your company’s indemnification obligations are reasonable to ensure that you have a reasonable opportunity to hold the lessor accountable if necessary, there are several reasons to hire a lawyer to review and negotiate your commercial lease’s boilerplate terms.
10. Uninformed Decision-Making Can Lead to Expensive Surprises
As a business owner, you cannot leave important legal and financial matters to chance. Failing to engage legal counsel to negotiate a commercial lease can lead to a variety of expensive surprises. By engaging a lawyer to advise you, you can make decisions strategically, and you can move forward with confidence knowing that you have secured a reasonable deal.
Speak with a Commercial Real Estate Lawyer in Miami or Fort Lauderdale
If you are preparing to enter into a commercial lease, you need to ensure that you are making an informed decision. To discuss the terms of your lease with an experienced commercial real estate lawyer at our offices in Miami or Fort Lauderdale in confidence, please call 305-768-9909 or tell us how we can help online today.