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Commercial leases are legally binding contracts for commercial property. The lease agreement defines the terms between the landlord (property owner) and the tenant (business) for renting the property. Examples of commercial leases include warehouses, offices, and retail businesses.
When the landlord and tenant negotiate a commercial lease, they prioritize protecting their best interests. Our Texas commercial real estate attorneys offer tips for negotiating a favorable commercial lease to help you protect your best interest.
Tips for Negotiating a Commercial Lease in Texas
Once you decide on a commercial property for your business, it is time to negotiate a commercial lease agreement. Generally, landlords prepare commercial leases to benefit their interests. Therefore, you must be vigilant to ensure the lease terms favor you.
Things to evaluate and consider before signing a commercial lease include:
Comparable Rent in the Area
To negotiate a fair rent payment, you need to know the comparable rents in the area. Verify the rent for similar buildings and spaces. However, your initial rent is not the only term to negotiate. Renewal options often include rent increases. Negotiating caps on rent increases helps ensure you can afford to stay in the commercial location if you wish to renew the lease.
Consider the Lease Term
Signing a long-term commercial lease may not be in your best interest. A long-term lease locks you into the location, which might not be a good fit for your business. Small businesses may want to negotiate commercial leases for one to two years with options to renew the lease. If the space does not work out, you are not tied to a lease for several years.
Negotiate Favorable Clauses
The landlord is unlikely to include clauses that would be favorable to you, such as allowing you to sublease the property. However, subleasing the property could be crucial if you need to relocate your company. You may want to negotiate improvements or changes to the property before you move into the property.
In some cases, you may want to negotiate the ability to terminate the lease in certain situations. For example, the landlord leases space to a company that directly competes with your company or a large anchor store that drives you out of business.
Review the Termination Clause Closely
Read the clause carefully. Ensure you understand the terms for default and termination. You need a clause that gives you sufficient time to cure the default before an eviction. You also want to negotiate favorable terms for penalties for early termination of the lease.
Remember, unfavorable terms for the tenant are often buried in fine print. Even though a commercial lease is lengthy, you must read each clause and all fine print to protect your interests and your company.
Contact Our Texas Commercial Real Estate Attorneys for More Information
The Texas Property Code for commercial tenancies can be confusing and complex. Consulting with experienced legal counsel is the best way to avoid problems that could hurt your business.
At Sul Lee Law Firm PLLC, our attorneys handle all matters related to commercial leases. From negotiating favorable lease terms and mediating disputes to fiercely pursuing litigation, our Texas commercial real estate attorneys can help you with all matters related to commercial leases. Call our office to schedule a consultation with an attorney.