What are some common issues that arise during the negotiation of a commercial lease agreement?
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As a lawyer, I can provide legal advice on the common issues that often arise during the negotiation of a commercial lease agreement.
Firstly, one of the main challenges in commercial lease negotiations is determining the length of the lease and any renewal options. It's important to make sure that the terms of the lease agreement provide a reasonable timeframe for the tenant to recoup their investment and profit from the business. Additionally, you want to be sure your client is not paying for any undue or extra costs, such as real estate taxes and other operational expenses that should be the landlord's responsibility.
Another common issue is rent and rent escalation (also known as rent increases). The landlord wants the highest possible rent, while the tenant wants the lowest. It is important that both parties conduct research on the current market conditions and average lease rates for similar properties. The lease rent escalation clause should also be discussed and agreed upon in detail.
The lease terms should also include details regarding any alterations or improvements to the leased property. The landlord should specify the types of improvements that can be made, how to seek approval and whether these expenses will be covered by the landlord or the tenant.
Maintenance and upkeep of the leased property often become contentious issues as well. Frequently, minor repairs are the tenant's responsibility, while major structural repairs or issues with HVAC or plumbing fall under the landlord's duty. Ensure these details are outlined in the lease agreement, along with who is responsible for utilities, insurance, and property taxes.
Finally, one of the significant issues is changing the lease agreement after it is signed, either due to changes in the tenant's needs or unforeseen circumstances. Provision for a sublet, right of first refusal or termination penalties should be negotiated in advance, and may require the approval of the landlord or lessor.
As always, it is crucial to engage a lawyer before finalizing any commercial lease negotiations; they will be able to provide tailored advice based on the locality, your business goals, and the specific terms of the agreement.
