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Many business owners lease commercial space for their offices, especially when starting out. Because signing a commercial lease is a huge commitment, it is crucial that you enter into the agreement fully informed. Forbes explains a few possible issues often found in leases so you can take the right steps to avoid them. By watching out for the following, you can rest assured that the lease you choose is in your best interest. Pass-through utility costs Most commercial leases include terms that stipulate tenants must pay for a portion of the utility costs, while the property owner takes care of the rest. Pass-through costs should be proportionate to the amount of space you are leasing. If you are expected to pay for utilities your business does not even use, it is best to keep looking for a suitable commercial property. Undisclosed fees Commercial leases are often complex. As a result, it is hard to determine all the hidden costs and fees that may be lurking beneath the fine print. That is why you or your attorney should request a full breakdown of all fees prior to signing. That way you have an opportunity to get clarification on fees that seem unnecessary or redundant. Scalability If your business is thriving, there is always a chance that you will need more office space in the future. Accordingly, it makes sense to secure a commercial lease with the ability to scale up built in. Otherwise, you may find yourself on the hunt for a new location when your existing lease is up and the office no longer meets your needs. Think about your plans over the lease term: Will you be hiring more workers? Do you have new products under development? Are planning on acquiring other businesses? If yes, scalability should be a priority.

Many business owners lease commercial space for their offices, especially when starting out. Because signing a commercial lease is a huge commitment, it is crucial that you enter into the agreement fully informed. Forbes explains a few possible issues often found in leases so you can take the right steps to avoid them. By watching out for the following, you can rest assured that the lease you choose is in your best interest. Pass-through utility costs Most commercial leases include terms that stipulate tenants must pay for a portion of the utility costs, while the property owner takes care of the rest. Pass-through costs should be proportionate to the amount of space you are leasing. If you are expected to pay for utilities your business does not even use, it is best to keep looking for a suitable commercial property. Undisclosed fees Commercial leases are often complex. As a result, it is hard to determine all the hidden costs and fees that may be lurking beneath the fine print. That is why you or your attorney should request a full breakdown of all fees prior to signing. That way you have an opportunity to get clarification on fees that seem unnecessary or redundant. Scalability If your business is thriving, there is always a chance that you will need more office space in the future. Accordingly, it makes sense to secure a commercial lease with the ability to scale up built in. Otherwise, you may find yourself on the hunt for a new location when your existing lease is up and the office no longer meets your needs. Think about your plans over the lease term: Will you be hiring more workers? Do you have new products under development? Are planning on acquiring other businesses? If yes, scalability should be a priority.

Whether you happen to be a business owner looking for property space or a real estate owner that leases property to businesses, chances are that you might find yourself negotiating an office lease someday. An office lease is a type of commercial lease, and like other leases, is something all parties involved will negotiate to receive the best benefit possible. There can be a lot at stake when it comes to negotiating an office lease. A business wants a good office location to operate out of. A property owner wants a tenant that will produce a healthy flow of rental income. If you are preparing to negotiate an office lease, Forbes explains what you might expect in your negotiation. Negotiating for space As a business owner, the amount of space you would want to lease would likely be one of your top concerns. Some businesses make the mistake of leasing too little space. When they want to expand later on, they find they lack the space to do so and have to renegotiate with the landlord for an expansion of space. Conversely, some businesses lease too much space. Businesses that do not grow fast enough to justify the extra space find themselves needing to sublet the space so they do not lose too much money from leasing excessive space. If you are a property owner, you may have to grapple with whether to allow your tenant to sublease to other tenants. Expanding the lease Sometimes a business leases only part of a property. Other tenants might have leases on the rest of the property. As a business owner, you might want to lease another section of the property if a neighboring tenant decides to move out. To this end, you might negotiate an expansion rights clause or a right of first refusal provision to expand into a vacant space. How to renew or end the lease If you are a business owner, you might find that the leased space is perfect for your company and you may not want to give it up. To extend your lease, you would likely negotiate for a renewal rights clause to help you hang on to the property. But if you are a property owner, you probably want a termination rights clause that spells out what will happen if the business breaks the lease early. The business will likely want limits to damages for leaving your property early, so this could become a seriously contested point in your negotiation.

Whether you happen to be a business owner looking for property space or a real estate owner that leases property to businesses, chances are that you might find yourself negotiating an office lease someday. An office lease is a type of commercial lease, and like other leases, is something all parties involved will negotiate to receive the best benefit possible. There can be a lot at stake when it comes to negotiating an office lease. A business wants a good office location to operate out of. A property owner wants a tenant that will produce a healthy flow of rental income. If you are preparing to negotiate an office lease, Forbes explains what you might expect in your negotiation. Negotiating for space As a business owner, the amount of space you would want to lease would likely be one of your top concerns. Some businesses make the mistake of leasing too little space. When they want to expand later on, they find they lack the space to do so and have to renegotiate with the landlord for an expansion of space. Conversely, some businesses lease too much space. Businesses that do not grow fast enough to justify the extra space find themselves needing to sublet the space so they do not lose too much money from leasing excessive space. If you are a property owner, you may have to grapple with whether to allow your tenant to sublease to other tenants. Expanding the lease Sometimes a business leases only part of a property. Other tenants might have leases on the rest of the property. As a business owner, you might want to lease another section of the property if a neighboring tenant decides to move out. To this end, you might negotiate an expansion rights clause or a right of first refusal provision to expand into a vacant space. How to renew or end the lease If you are a business owner, you might find that the leased space is perfect for your company and you may not want to give it up. To extend your lease, you would likely negotiate for a renewal rights clause to help you hang on to the property. But if you are a property owner, you probably want a termination rights clause that spells out what will happen if the business breaks the lease early. The business will likely want limits to damages for leaving your property early, so this could become a seriously contested point in your negotiation.

Commercial real estate laws are much different than those for residential real estate because the goals are different. In commercial real estate, you have the right to limit who you rent to. While you cannot discriminate based on protected factors, such as race or religion, the California Department of Real Estate does state that you have the right to limit the use of your property. Essentially, this means that you can deny a rental application if you do not like the specific business the applicant wants to put there. Contract details You can include in your contract limitations about the use of the property. This would allow you to exclude certain businesses for the premises. It is essential to ensure your contract is clear and covers everything possible to exclude certain types of businesses. If your contract is not precise, then you will have no legal grounds upon which to object to the business operations. Change of business If your tenant suddenly changes his or her business or shifts the focus to something of which you do not approve and it violates the contract, then you can terminate the agreement. You may still have to go through the eviction process. The tenant may also have the right to end your agreement in some situations without a breach occurring. Illegal activities If the business activities are not legal, then you still must state in your contract that the tenant cannot use the property for illegal purposes if you want to be able to end the agreement. Illegal activity is not an automatic trigger for your rights to evict.

Commercial real estate laws are much different than those for residential real estate because the goals are different. In commercial real estate, you have the right to limit who you rent to. While you cannot discriminate based on protected factors, such as race or religion, the California Department of Real Estate does state that you have the right to limit the use of your property. Essentially, this means that you can deny a rental application if you do not like the specific business the applicant wants to put there. Contract details You can include in your contract limitations about the use of the property. This would allow you to exclude certain businesses for the premises. It is essential to ensure your contract is clear and covers everything possible to exclude certain types of businesses. If your contract is not precise, then you will have no legal grounds upon which to object to the business operations. Change of business If your tenant suddenly changes his or her business or shifts the focus to something of which you do not approve and it violates the contract, then you can terminate the agreement. You may still have to go through the eviction process. The tenant may also have the right to end your agreement in some situations without a breach occurring. Illegal activities If the business activities are not legal, then you still must state in your contract that the tenant cannot use the property for illegal purposes if you want to be able to end the agreement. Illegal activity is not an automatic trigger for your rights to evict.

Whether you are an entrepreneur preparing for your first brick-and-mortar opening or an established company looking to relocate or expand, establishing favorable terms during lease negotiations can make the difference between struggling and striving. Businessmen and women themselves, savvy landlords often create lease contracts that ensure the profitability of their own bottom line. One of the most important aspects of negotiating a commercial lease is deciding between a shorter or longer-term contract. 1. Know that landlords often favor longer lease terms Landlords generally favor longer leases that allow them to realize a stable cash flow while minimizing the expense associated with contracting and installing a new tenant. On the other hand, business owners often prefer shorter leases for various reasons. New businesses that anticipate rapid growth and the need for more space may prefer to keep options for relocation or expansion open. Meanwhile, entrepreneurial companies may not be ready to commit to a specific space. 2. Consider the potential advantages of a longer lease Because many landlords prefer longer, stable lease terms, they may be willing to offer prospective tenants certain perks for committing to a long-term lease. In addition to reducing the cost per square foot of space, a landlord may provide significant tenant improvements if a business owner chooses to commit for a certain period of time. That might include changes to walls, ceilings and lighting as well as custom design elements. 3. Remember to think about renewal options Business owners considering a lease should also pay close attention to renewal options. Often a contract includes options to renew either via formal request or automatically. Established companies may benefit from a longer original lease term with multiple options for renewal, while a start-up organization may prefer a short initial contract followed by one or more renewal options. 4. Realize that terms are negotiable Whether your organization is just getting started or you have an established brand, know that commercial leases are nearly always negotiable. By taking the time to evaluate all your options, you may be able to get more for your money than you anticipated.

Whether you are an entrepreneur preparing for your first brick-and-mortar opening or an established company looking to relocate or expand, establishing favorable terms during lease negotiations can make the difference between struggling and striving. Businessmen and women themselves, savvy landlords often create lease contracts that ensure the profitability of their own bottom line. One of the most important aspects of negotiating a commercial lease is deciding between a shorter or longer-term contract. 1. Know that landlords often favor longer lease terms Landlords generally favor longer leases that allow them to realize a stable cash flow while minimizing the expense associated with contracting and installing a new tenant. On the other hand, business owners often prefer shorter leases for various reasons. New businesses that anticipate rapid growth and the need for more space may prefer to keep options for relocation or expansion open. Meanwhile, entrepreneurial companies may not be ready to commit to a specific space. 2. Consider the potential advantages of a longer lease Because many landlords prefer longer, stable lease terms, they may be willing to offer prospective tenants certain perks for committing to a long-term lease. In addition to reducing the cost per square foot of space, a landlord may provide significant tenant improvements if a business owner chooses to commit for a certain period of time. That might include changes to walls, ceilings and lighting as well as custom design elements. 3. Remember to think about renewal options Business owners considering a lease should also pay close attention to renewal options. Often a contract includes options to renew either via formal request or automatically. Established companies may benefit from a longer original lease term with multiple options for renewal, while a start-up organization may prefer a short initial contract followed by one or more renewal options. 4. Realize that terms are negotiable Whether your organization is just getting started or you have an established brand, know that commercial leases are nearly always negotiable. By taking the time to evaluate all your options, you may be able to get more for your money than you anticipated.

Residential rent control is a cap on the amount of money a landlord can charge tenants per month to lease a living space. It is beneficial for residential tenants because it prevents their rent from increasing to something more than they can afford. However, what is beneficial in residential real estate can be detrimental to commercial real estate. Approximately 30 years ago, the California legislature recognized the potential statewide adverse economic effects of commercial rent control. Therefore, it passed a law prohibiting any public entity from enacting or enforcing it. Why is commercial rent control detrimental? SF Gate explains why commercial rent control is not beneficial. The businesses that receive the benefit of commercial rent control have an unfair advantage over their competitors. This discourages competition among businesses, and the open market suffers as a result. Why is a statewide prohibition on commercial rent control necessary? According to the California Civil Code, even if only one community were to enact commercial rent control, the economic impact would extend beyond its borders. The resulting economic drain could extend statewide. What are the law’s limitations? The text of the law expressly limits its scope in a number of ways. For example, a commercial lease is a legal document that requires certain duties of both tenants and landlords. The law prohibiting commercial rent control does not relieve either party of the obligation to fulfill his or her duties under the terms of the agreement. Additionally, if a tenant wishes to sublet the property and the landlord allows it, the law does not prevent the landlord from establishing the price required of the sublessee expressly in the commercial lease.

Residential rent control is a cap on the amount of money a landlord can charge tenants per month to lease a living space. It is beneficial for residential tenants because it prevents their rent from increasing to something more than they can afford. However, what is beneficial in residential real estate can be detrimental to commercial real estate. Approximately 30 years ago, the California legislature recognized the potential statewide adverse economic effects of commercial rent control. Therefore, it passed a law prohibiting any public entity from enacting or enforcing it. Why is commercial rent control detrimental? SF Gate explains why commercial rent control is not beneficial. The businesses that receive the benefit of commercial rent control have an unfair advantage over their competitors. This discourages competition among businesses, and the open market suffers as a result. Why is a statewide prohibition on commercial rent control necessary? According to the California Civil Code, even if only one community were to enact commercial rent control, the economic impact would extend beyond its borders. The resulting economic drain could extend statewide. What are the law’s limitations? The text of the law expressly limits its scope in a number of ways. For example, a commercial lease is a legal document that requires certain duties of both tenants and landlords. The law prohibiting commercial rent control does not relieve either party of the obligation to fulfill his or her duties under the terms of the agreement. Additionally, if a tenant wishes to sublet the property and the landlord allows it, the law does not prevent the landlord from establishing the price required of the sublessee expressly in the commercial lease.

Whether you are looking for property to set up business or you have commercial property that you wish to rent out, it is helpful to understand how commercial leases work. Commercial leases are beneficial for many types of businesses, as they allow owners to save capital and put more into their business. Furthermore, the terms of commercial leases are negotiable and may vary from contract to contract. In California, and in many other states in the nation, there are different types of commercial leases. It is important to understand what types of lease best meets your needs. Choosing the wrong types of agreement may cause serious repercussions for landlords and clients alike. Understanding property expenses Commercial leases differ depending on how they handle property expenses, including property insurance, real estate taxes, and common area maintenance charges. Common area maintenance charges are placed on top of the base rent and involve items, such as landscaping, parking lot maintenance, snow removal and other management expenses. Types of commercial leases While commercial leases vary depending on the specific terms negotiated between the landlord and tenant, most fall under these general types: Net lease: The tenant is responsible for taxes, insurance and maintenance costs. Double net lease: The tenant is responsible for taxes, insurance and rent. Triple net lease: The tenant is responsible for all property expenses, including any unexpected expenses. Gross lease: The landlord is responsible for all property expenses. Modified gross lease: Both the landlord and tenant split property expenses based on agreements. It is important to keep in mind that commercial leases have fewer legal protections when compared to residential lease agreements.

Whether you are looking for property to set up business or you have commercial property that you wish to rent out, it is helpful to understand how commercial leases work. Commercial leases are beneficial for many types of businesses, as they allow owners to save capital and put more into their business. Furthermore, the terms of commercial leases are negotiable and may vary from contract to contract. In California, and in many other states in the nation, there are different types of commercial leases. It is important to understand what types of lease best meets your needs. Choosing the wrong types of agreement may cause serious repercussions for landlords and clients alike. Understanding property expenses Commercial leases differ depending on how they handle property expenses, including property insurance, real estate taxes, and common area maintenance charges. Common area maintenance charges are placed on top of the base rent and involve items, such as landscaping, parking lot maintenance, snow removal and other management expenses. Types of commercial leases While commercial leases vary depending on the specific terms negotiated between the landlord and tenant, most fall under these general types: Net lease: The tenant is responsible for taxes, insurance and maintenance costs. Double net lease: The tenant is responsible for taxes, insurance and rent. Triple net lease: The tenant is responsible for all property expenses, including any unexpected expenses. Gross lease: The landlord is responsible for all property expenses. Modified gross lease: Both the landlord and tenant split property expenses based on agreements. It is important to keep in mind that commercial leases have fewer legal protections when compared to residential lease agreements.