Commercial Lease Pitfalls

Many times new business owners are faced with difficult legal decisions when dealing with renting commercial space. Most people do not take the time to review their leases. Tenants are so excited to be entering into a lease and starting or expanding their business that they do not think about what happens if things do not go as planned. Often tenants might not realize that they can negotiate the terms of the lease. Almost everything is negotiable! Tenants who are thinking about entering into a commercial lease need to be aware of the following clauses. (1) Percentage Rent – A percentage rent clause may require the tenant to pay additional rent based on sales; (2) CAM charges – these are charges for the “Common Area Maintenance” of the leased space; (3) Personal Guarantees – this clause requires an individual to guarantee the lease; and (4) Entireties Clause – almost every lease will have an entireties clause. This clause will basically state that the lease is the final and complete expression of the parties’ agreement. This means that any agreement that a tenant had with the landlord (whether in writing, verbally or by email) prior to the signing of the lease, is now, in most instances, unenforceable. Tenants need to be careful when entering into leases and they need to make sure that they understand and are comfortable with the terms of the lease.

The information in this article is not intended as legal advice but is instead intended to provide a general understanding of the law. Readers with legal problems, including those whose issues are addressed here, should consult an attorney of their choosing for advice on their particular circumstances. Ashley Atwood is an attorney with Levin & Atwood, L.L.P. She has a general practice focusing on corporations and transactional law. Ashley can be reached via phone at 281-579-6044 or by email ashleyatwood@levinandatwood.com