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Use Caution when Signing Commercial Leases with These Provisions

Aug. 8, 2018

Operating a business is demanding. Owners often have numerous responsibilities to juggle and goals to prioritize, and the fact is that few can do it alone. For instance, if you are looking for commercial property, you are likely focused on finding the space your business needs to be successful. You may not know the ins and outs of commercial leases or the terms of such agreements.

As such, it can be possible to overlook or misunderstand elements of your lease that could ultimately work against you, including those we discuss below.

  1. Zoning – Not all property can be used for the same purposes, due to zoning laws. Property may not be zoned for commercial use, and it if is, it may not allow for all types of commercial entities. Before leasing, confirming the zoning of a property can be crucial.

  2. Restrictive Use Covenants – These lease terms typically favor tenants, but they can also spark disputes. Essentially, they restrict the types of merchants who can lease property from the landlord. This can prevent competing businesses from occupying the same building or the same geographical area.

  3. Ending the Lease – Leases will often include details regarding termination of the lease. This can include “going dark” provisions, grounds for eviction and renewal terms. While these clauses may not seem immediately important, they can have a dramatic effect on the future of a business.

  4. Methods for Resolving Disputes – Often, commercial leases will include a clause specifying the method for resolving disputes, should they arise. For instance, a lease might specify that parties agree to arbitration to resolve disputes, which means that you won’t go to court. Knowing these restrictions can be crucial in assessing your legal options.

Many business owners are unfamiliar with these and other elements of a commercial lease. This is why it is so important to consult an attorney before signing anything. A legal professional can help you understand the terms of a commercial lease and help you avoid agreeing to something that puts your business or your bottom line in jeopardy.