As a small business owner, you have to complete a variety of tasks every single day. If your company is expanding, though, finding the right property is likely high on your priority list. Unless you regularly deal with commercial leases, you may feel a bit out of your element.
Signing a bad commercial lease can ruin your business enterprise. After all, if you default on the lease, your landlord may have a cause of action against your company. While commercial leases come in a variety of styles, there are some red flags that may cause you to reconsider the commitment. Here are three of them.
- Excessive lengths
As you know, it can be difficult to gauge the future success and growth of any small business. Therefore, you should probably think twice before signing a long-term lease. If your company outgrows the space or you must wrap up business, you may have to continue to pay rent until your landlord finds a new tenant. Generally, commercial leases should be for about two years. The same is true for lease renewals.
- Triple-net clauses
Sometimes, landlords ask renters to pay taxes, insurance, maintenance fees and rent. Known as triple-net clauses in commercial leases, these provisions almost always benefit the landlord. They can cause your property expenses to rise both considerably and uncontrollably.
- Undefined fees or penalties
Good commercial leases are specific. If the lease you are thinking about signing has hidden fees, undefined penalties or other costs, you may be in for a big surprise. As such, always look for a commercial lease that spells out every expense your small business must cover.
Like with all contracts, you should read and understand any commercial lease before you sign it. If you notice any of the above red flags, you should think twice before executing your lease. Only when you fully comprehend the consequences of the contract can you make the right decision for your company.