Understand the business of the tenant:
Before the attorney even begins reading the documents, they will want to know something about your business. Different types of businesses have different needs when it comes to a lease. A bakery and a CPA firm will have much different expectations about what the premises requirements are and how the lease should be structured.
Read through the lease looking for mistakes:
A real estate attorney will carefully read every word of the lease looking for mistakes. Common mistakes include:
- Having the wrong entity name for the tenant
- Listing the wrong rent amount
- Having the wrong start date for the lease
- Clauses that are inconsistent with each other
Most of the time landlords or property management companies working for landlords want to streamline the lease process. They will use standard lease agreements, but sometimes typos creep into the document when changes are made or previous tenant information is not removed. You want to make sure your lease is as accurate as possible to avoid future issues.
Evaluate the commercial lease for hidden fees:
Commercial lease agreements cover much more than your monthly rent. There may also be fees you are required to pay for the upkeep of common areas, you may be expected to contribute to property tax payments, and you may be assessed quarterly or annual maintenance fees. Often these fees are buried deep in the agreement and are often not talked about until it is time for the landlord to collect them.
Even worse, often leases allow landlords to raise these fees with little notice and without having the fee increased tied to a specific formula. A lease review will help you understand the full costs you are undertaking and may give you some leverage in requesting changes to the ways some fees are calculated.
Make sure lease clauses are lawful:
You would be surprised by how often clauses that may not be legal or legally enforceable make their way into commercial leases. Often, these documents are used without change year after year and they do not always reflect the current state of contract and real estate law. Even if these clauses cannot be used against you, having them removed is an important risk mitigation strategy. It prevents having to waste resources down the road on a potential dispute and it shows the landlord that you are professional and will be proactive with protecting your rights. It sets the tone of the tenant-landlord relationship from the start.
Evaluate the lease clauses for fairness:
You should expect the lease to favor the landlord. Often commercial lease agreements are so far slanted in the landlord’s favor that accepting the lease as written would be a business mistake because it puts too much risk on our shoulders.
It is critical that you know exactly what obligations you are undertaking before you commit your business to a commercial lease.
Flag any high-risk clauses:
During a commercial lease review, a real estate attorney may find clauses that put your business in an unusually high-risk position. These clauses may be especially high-risk due to your business type, because of economic conditions, because the clauses are poorly worded, or some other reason. However, the attorney performing the review will flag these clauses to make sure that you understand how risky they are for your business or even for you personally.
One of the most valuable parts of the commercial lease review process is the recommendations the attorney will make. The recommendations will be personalized to your business, your circumstances, and the lease. The recommendations could range from sign the lease to request these changes to avoid dealing with this landlord.