Important Details to Remember When Renting a Commercial Property for Your Business

Important Details to Remember When Renting a Commercial Property for Your Business

When owning a business, you have one of two options either buy or rent a business property. Renting gives you more flexibility and room for growth as you are not stuck in an owned place. For instance, if your business is growing, you can move to a bigger place and vice versa. Yet there are some benefits to renting a commercial property, for renting is much cheaper than buying a business property. Usually, you would have fewer responsibilities towards the property if you are renting, but it all depends on the contract. This article will give you more details about renting a commercial property for your business.

What Is Included in the Lease

Here are the most common types of commercial leases:

Gross Lease

The tenant pays a fixed monthly amount and the landlord pays all the expenses related to the building.

Net Lease

Tenants pay the base rent plus the building expenses.

Modified Gross Lease

That is a mix between net and gross lease. Tenants here will have a gross lease and pay for certain increases in the operating expenses.

Rates and VAT

Most if not all commercial landlords charge VAT on rents, which means there is an additional 20%. Moreover, there are business rates on commercial properties that are set by the government. Also, tenants are required to pay for different kinds of insurance like directors and officers insurance, building insurance, contents insurance, and public liability insurance. In order to know exactly how much you will be paying to rent a business property, make sure you know everything about these rates.

Repairs

Repairing obligations differ according to the lease. However, almost all leases include that the tenant has to keep the property in a fair condition. This means that when you decide to leave, you might be required to do all the repairs and reverse any changes you made to bring it back to its original condition. Any leaks or damages done to the property will be the tenant’s responsibility to fix and repair.

Lease Audit and Recovery Service

There are different kinds of commercial leases, but most of them include “operating expenses”, and that means that the landlord has the right to charge you for costs of any operating services like cleaning and utilities. 

There is a wide range of operating expenses, and they are different in every lease, that is why landlords find it very hard to tailor each lease according to the tenant’s needs. Lease audit and recovery service ensures that tenants are not overpaying rental obligations. As a tenant, you need to find the best lease audit and recovery service to protect your interests and make sure that you are not paying more than you have to. Not auditing your lease might result in you unknowingly accepting an incorrect charge permanently.

Breaking a Lease

Tenants can ask for a break lease clause to make the terms of breaking the lease clear. This is a very important detail in a commercial property’s rent agreement because breaking a lease can cost you a lot of money, and in some cases, it can cost you more than the deposit, which means you’ll lose your security deposit and be legally required to cover the cost of a stipulation in the agreement, depending on what it is. Tenants could end up paying full rent till the end of the lease. The penalties due to breaking commercial leases vary from state to state. However, in case a tenant wants to transfer their lease to another tenant, they can negotiate that with the landlord.

Renewal Terms

There are two different types of leases; short-term and long-term. Long-term leases usually have lower rent rates, to be paid for a long period of time. Short-term leases, on the other hand, offer more flexibility, but the landlord can change the terms of the agreement if the tenant wants to renew. However, tenants can discuss that before renting the place with the landlords and have the new terms that will be applied in case the tenant asks for renewal clearly mentioned in the lease.

Commercial leases come in different shapes and forms, which can be a little bit challenging for tenants. However, you can seek the help of professionals to help you decide what is best for your business. Knowing the details of renting a business property and the consequences of breaking or transferring the lease would definitely help tenants make the right decision, which will help them gain more profit. Whether you are a start-up or running a business that is growing and you need to relocate, the details mentioned above should ease the process of renting a commercial property.