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3 things to consider when writing a commercial lease

As a landlord, your primary focus is probably on finding tenants that best fit your commercial space. Potential businesses that will rent your property without hassle.

Finding the right tenant is important, but make sure the lease addresses the needs of both landlord and tenant. Here are three things to consider before creating a commercial lease:

1. Stability vs. flexibility

Perhaps the most important aspect of a commercial lease is the time frame. As a renter, you need to take your own situation into account to determine what would make the best fit for you.

The length of your lease should take several factors into account. Is the space popular or have you had trouble filling it in the past? Do you plan to make major changes or renovations in the next five years or so?

Before you offer a lease, consider what you want to do with the space. If you know what you’re looking for, you can find tenants who fit that profile. You may advertise differently depending on what you're looking for. Short leases with higher prices will attract a different audience than long commitments.

2. Dividing costs

Building repairs are a major cost, and it makes sense to distribute them. There are several common splits between businesses and the building owner.

Depending on a host of factors, such as your location and the rental market, you may take most of the repair costs. Lowering the cost of building maintenance can be a great way to stand out from other competitors.

If you’re located in a market that is more advantageous to landlords, you may be able to include a more even divide of building expenses.

3. Handling out-clauses

Unfortunately, many businesses close unexpectedly. If that’s the case, your lease needs to have a provision for how to deal with these situations. You need to carefully weigh the needs of your own financial situation and what the tenant wants to do.

It may be beneficial to both parties to allow a tenant a chance to find a replacement renter if needed. As long as they meet qualifications, it can give your tenant needed flexibility with low risk.

While this eliminates a small measure of security for yourself, it may give the renter the confidence they need to agree to a longer lease term.

Commercial leases need to reflect the people who are involved with them. Your lease should be a good fit for yourself and the tenant. This may mean compromises from both sides.

If you have any questions around what to include in a commercial lease, a real estate attorney can help.

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