You’ve found your property, the price is right and you’ve settled on the length of your lease. But let’s look at 2 major points to keep in mind. First, a lease is almost always in favor of the landlord. Meaning that you should read over your lease carefully, and make sure you’re comfortable with its terms. Second, a lease is almost always negotiable, and you may be able to make changes to fit your business needs. There are ways to work with your landlord on the terms of your lease, also known as lease clauses, before it’s signed.
The Top 10 Essential Elements of a Common Lease in North Carolina are:
- Parties Clause – The beginning of a lease usually names the landlord and tenant, this is the “Parties” clause. It may seem like stating the obvious but you should pay close attention to this, making sure the name you use is the FULL legal name of your business. Be sure to include your designator, corporation, LLC, etc. If you use your personal name, or do not properly sign on behalf of the corporation it may lead to serious repercussions. Are you personally responsible under the lease? I’m willing to bet the reason you incorporated was to avoid personal liability in the first place.
- Premises Clause – This clause refers to the property you’ll be occupying or the space itself. It’s often located right after the Parties clause. A street address might be sufficient if you were occupying an entire building. When leasing less than an entire building, like a room or an office within a building, the space needs to be described in detail. Attention needs to be paid to the other areas of the facility you will have access to like storage rooms, elevators, kitchen facilities and parking.
- The Use Clause and Exclusive Clause – These clauses are in place to limit use of space and give special privileges to space. The Use clause limits how you can use the space. For instance, what kind of business you can conduct. The Use clause limits how you’ll use the rented space or what products you may offer. Make certain that the use clause is fair and fits your business needs. The Exclusive clause may state that you are the only company that may conduct that type of business or carry that particular merchandise within the building.
- Term Clause – This clause states the beginning and ending dates of your lease. You should read over this very carefully. It is not as simple as “5 years.” In this clause you will also find the start dates for other things, like insurance, business opening and when rent is due. Understand these dates and make the necessary changes so that you don’t find yourself thinking that the lease says one thing when in actuality it means something entirely different.
- Rent Clause – In this clause your monthly rent obligation, as well as other possible expenses are usually listed. Rent estimates may include tenant improvement allowances, common area expenses and rent increase dates. Make sure you understand and are comfortable with all the costs of renting before signing your lease.
- Security Deposits – Security deposits are put in place to assure that the landlord is protected in case you fail to pay the rent or other payments as required under the lease. This is where residential and commercial leases differ. In a residential lease usually only 2 months rent are required as a deposit, but in a commercial lease the landlord can require whatever they want.
- Improvements and Alterations Clause – Sometimes you’ll want to make changes to your new space in order to better fit your business needs. In this case your lease needs to address all the improvements. The designing, start date and price, who pays, and who does the work, all have to be agreed upon by you and your landlord. If the space is unfinished before you move in, determine who is responsible for the costs to finish it and the deadline by which it is to be finished.
- Maintenance, Utilities, and Code Compliance Clause – This clause states what duties you will be responsible for while you are renting the space. This may also include how the utilities will be paid.
- Parking, Signs, Landlord’s Entry, and Security Clause – This clause addresses general understandings with your landlord. Parking and business signs are all important for your business, so make sure the agreements with your landlord fit your needs.
- Insurance Clauses – Your landlord will require you to have insurance, like property and liability insurance, rental interruption insurance, and leasehold insurance. This clause is very important, and you’ll want to decide on adequate levels of each to make sure your business needs are met, and are in agreement with your landlord.
Commercial real estate leases can be very confusing and you want to be sure that someone is looking out for your best interests. When handled properly, they can prevent unnecessary complications and even litigation. The attorneys at Fisher Stark are experienced and knowledgeable, and can assist you with the complexities of commercial leases. In North Carolina, we handle commercial leases in Asheville, Hendersonville, Waynesville, Franklin, Murphy and Sylva, as well as all of the communities in Buncombe County, Henderson County, Haywood County, Madison County, Transylvania County, Jackson County, Macon County, Graham County and Clay County. We can help you negotiate a commercial lease that best fits your needs and protects your interests. Please call us at 828 505 4300 to set up a free consultation.
Last updated 7/5/2015