Shopping Center Lease
Shopping Center Leases
Landlords are more experienced in the area of commercial leasing which means the tenants almost always find themselves at a disadvantage in commercial lease negotiations. The rental agreement or lease is often written by the landlord, which means that a majority of the provisions will be tilted to favor the landlord. An experienced attorney can look for provisions that favor the landlord but are harmful to the tenant.
What To Consider When Negotiating A Lease
Whether or not a party has leverage during lease negotiations is determined by circumstances. Large businesses that have operations all over the nation have more leverage than small, local, or regional businesses when negotiating with a large real estate company landlord. Another scenario is when there are many desirable similar spaces. In such a situation, the tenant with good credit and an established business has more negotiating power.
You should also consider the time limit for negotiating a commercial lease. The negotiations are often not easy and that is why some impatient or desperate tenants concede too soon to unfavorable terms. An attorney that has experience with commercial leasing in the area knows the leasing terms that are likely to be negotiable and for this reason will save you time and money.
Important Lease Provisions You Should Always Review
A commercial lease agreement can be as long as ten pages or longer depending on the type of commercial space a business wants to use. These agreements may also be full of legalese but that should not be a problem if you have a real estate lawyer helping you. Some of the key provisions you should pay close attention to include:
- Operation covenants: These establish the days and hours the business owner should operate the business. You should consider negotiating a “go dark” option in the lease which will allow you to close the business for repairs and remodeling during times it’s required to be open. People that operate non-traditional businesses should ensure that the lease does not limit their operation hours or days.
- Common Area maintenance costs (CAM): A lease may require you as the tenant to pay a certain amount for maintenance of common areas. Ensure the lease specifies the costs for utilities, grounds, and other common areas.
- Competition prevention through exclusive clause: An exclusive clause involves a landlord promising a tenant that only that tenant and no one else may engage in a particular type of business in the mall or building. You need to ensure that the clause clearly defines the prohibited activities so that they can be enforceable. Before you sign a lease, find out if there are exclusivity provisions already in place that may limit the activities you want to carry out in the leased space.
- Term: Only sign a lease that has a term of three to five years if you are a new business that is still building clientele. Established businesses should seek longer and multiple renewal terms for stability of location.
These are just a few of the many considerations involved in negotiating commercial lease. A knowledgeable attorney can provide valuable advice and make the negotiation task less daunting.
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