Before entering into a commercial lease, there are at least 4 things a landlord and tenant should consider. Consider the following:
1. Lease Commencement Date. The landlord and the tenant’s interest widely vary here. The landlord wants the lease commencement date to be as early as possible while the tenant wants to delay the lease commencement date until it is able to occupy the leased premises.
2. Payment of Tax and Operating Expenses. Generally, the landlord wants to pass through all of the buildings operating costs to the tenant. Therefore, the landlord will want to use as broad of language as possible to include all known expenses as well as those expenses that the parties did not contemplate at the time the lease was created.
3. Assignment and Subletting. Assignment and subletting provisions govern the tenant’s ability to transfer its leasehold interest. Naturally, the tenant desires the ability to assign or sublet the premises at its option. The landlord, however, prefers to maintain control over who its tenant is. Generally, the landlord is concerned about the economic ability of any proposed tenant to pay rent. There are also certain damages issues that relate to whether the tenant has a right to assign or sublet its lease.
4. Damage and Destruction. These provisions determine the risk of loss due to unforeseen occurrences. The tenant will want the ability to terminate its lease in the event of loss or destruction of the leased premises. The landlord, in turn, will want to enforce the lease while it makes repairs.
These four items are just a few of the many negotiating points a commercial landlord and tenant face prior to entering into a commercial lease. It is important to understand these, as well as the other key commercial lease provisions, by talking to a commercial real estate attorney, prior to entering into a lease for commercial space.