Negotiating Commercial Leases
We cannot stress it enough: DON’T just sign the preprinted lease your landlord hands to you. Leases are contracts just like any other contracts. They will govern your ongoing relationship with your landlord and they will determine when your relationship will end – and how.
Every lease is different because tenants usually have different needs. Do you need money for upfitting your leased space? There are ways in which you can get your landlord to bankroll those improvements through the lease. Do you need specific parking? Do you need to ensure that there are no competitors in the same shopping center? Do you think the landlord is asking too much rent, but you really want that particular space? There are ways to negotiate lots of issues in a commercial lease, and we can help.
Breaking Your Commercial Lease
So, you might be asking, “Can I break my lease?” The law assumes that commercial leases are negotiated between sophisticated business parties, so there are not the statutory protections for tenants in the area of commercial leases like there are for residential leases. Your lease may require that you fulfill all obligations, including payment of rent, to the full term of the lease. Therefore, if you signed a personal guaranty to the lease, even if you close your business, you could be personally liable to the landlord. There are ways in which these costs may be mitigated, but it will depend on the facts in your situation. Even if repairs are needed in your space, that may not be enough to get you out of your lease – many commercial leases require the tenant to make repairs. We advise having an attorney review your specific lease and circumstances.
Common Area Maintenance
A common question concerns “additional rent” or “CAM.” CAM stands for common area maintenance, which covers expenses the landlord passes through on a pro-rated basis to the tenants. The formula behind these charges can be more or less fair to tenants depending on the square footage of the leased and leasable space. In addition, there are expenses that landlords would like to pass through that you may believe are unfair or that inure to the landlord’s long-term interest. It is advisable to have an attorney review these with you carefully so that you can keep these charges at a minimum. CAM charges do not usually include taxes and insurance, which are passed through separately to tenants. You need to understand all of the charges that will be passed on to the tenant and how to protect yourself from the rising costs of these “additional rents.”