Critical Commercial Lease Considerations

When a startup enters into a commercial lease with a potential landlord, or a commercial landlord decides to lease some space to a new tenant, the final terms of that agreement could determine either the overall success of that new company or the profitability of the landlord’s business. Some elements of the commercial lease, such as the term of the lease and the rental price, are often the two most important aspects of any such agreement.

For a new company, meeting the monthly rent required by the lease for the full term is often crucial to the company’s success. An important consideration is the length of the lease. It should be long enough so that the tenant feels secure that he or she will have the facility for a given time. Yet it needs to be limited in length so that the tenant will not incur obligations that he or she won’t be able to keep in the long term.

Commercial lessors (landlords) need to maximize the profit they can gain from the rented space by setting their rents high enough to ensure profitability while maintaining their competitiveness within the marketplace. As for the length of the lease, the lessor would like to lock in a good tenant for a longer term. Yet if the tenancy turns out to be problematic or if it is questionable that the new company will succeed, the landlord may be reluctant to offer a lengthy term.

Each party may be able to find a happy medium if the lessor offers renewable terms after the initial lease and escalates the price at stated intervals. Most commercial leases address other issues such as additional charges beyond the base rent, what happens in the case the tenant defaults and who bears responsibility for certain types of repairs.

A commercial lease usually is complex and has enormous consequences for your business. It is wise to consult with attorneys who have experience negotiating and drafting lease agreements so that your interests are protected.  Attorney George “Dave” Giddens has spent several years representing many types of businesses and negotiating commercial leases.  Contact Giddens & Gatton Law, P.C. at (505) 633-6298 to set up an appointment or visit the firm’s website at Giddens & Gatton Law, P.C. is located at 10400 Academy Road N.E., Suite 350 in Albuquerque, New Mexico.