Understanding the basics of a Commercial Lease
The Basics of Leasing Office Space
If you are considering renting office property for your business, you will need to have a basic understanding of the costs and issues involved when taking on a commercial office lease. In this article, we address some of the main issues you are likely to encounter during office lease negotiations, to ensure you are hundred per cent clear about your obligations and responsibilities as a commercial tenant.
Types of Office Leases
There are various types of office leases, and you will need to determine which type of lease best suits your financial needs.
- A gross lease typically is all-inclusive of rent, taxes, insurance and maintenance costs.
- A triple net lease is a set rental amount, plus a share of the taxes, insurance and maintenance costs.
Understanding the difference between these two common types of leases is essential to help you calculate your rental and operational costs, and so that you are comparing like-with-like when considering various properties.
It needs to be clear within the office lease who is responsible for repairing (and paying for) any maintenance, repairs or improvements to a property. Many commercial tenants like to take full responsibility of the repairs to ensure they happen on time and do not affect their commercial operations.
Common Area Maintenance
Common Area Maintenance (CAM) is the amount charged to tenants for expenses to maintain hallways, restrooms, parking lots and other common areas of the demise. Make sure the office lease clearly states what percentage you will be responsible for paying, and where possible ask for the Statements of Accounts of the last few years so you can accurately assess the likely CAM costs you will be paying.
Cost of Office Build-Out
Many office properties require some sort of modification and build out for it to be suitable for a tenant to move in. A commercial lease often states whether the Landlord or the Tenant will arrange and pay for the build out before a tenant takes occupation. If the Landlord pays for the build out, make sure it is clear when the improvements will be complete and whether they will meet your specification. There are many complex legal issues that can arise during office lease negotiations and transactions. So before agreeing to, or signing, any commercial lease, make sure you ask a Real Estate Lawyer to review it on your behalf.
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