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By Spencer Young
Associate Attorney

Commercial leases are crucial for many businesses. They can provide a foundation for operations and growth. However, these complex agreements can be challenging. Many businesses fall victim to common pitfalls with significant financial and legal consequences. 

Sul Lee Law, with its experienced commercial real estate lawyers, assists clients in identifying and avoiding these pitfalls, fostering a smooth and successful leasing experience.

Unclear or Ambiguous Lease Terms

Precise language and definitions are crucial in commercial leases. Ambiguous terms can lead to misunderstandings and disputes, so ensuring that all parties clearly understand the lease provisions is essential. Carefully review the lease for any unclear or vague language, then seek clarification from the landlord or their representatives. Failing to address ambiguous terms can result in costly disputes down the line.

Inadequate Due Diligence

Thoroughly research the property and landlord before signing a lease. Gauge the property’s suitability for your business needs, investigate its condition, zoning, and compliance with local regulations, and research the landlord’s reputation and track record. Consider the location’s accessibility, parking, and proximity to your competition. Taking the time to conduct due diligence can save you from unwanted surprises and ensure that the property is a better fit for your business.

Failing to Negotiate Key Terms 

Do not accept the first lease offer without negotiation. Some key terms to consider include: 

Review market rates for similar properties in the area and examine your business’s long-term needs and growth plans. A well-negotiated lease can provide significant financial benefits and help your business thrive.

Overlooking Hidden Costs

Commercial leases often include expenses beyond base rent, such as common area maintenance (CAM) fees, property taxes, insurance, and utilities. Be aware of these costs and factor them into your budget. Review the lease for any additional costs or expenses, understand how they are calculated, and whether there are any caps or limits. Budget accordingly to avoid unexpected financial strain, as failure to account for hidden costs can lead to budget overruns and financial difficulties.

Ignoring Subletting and Assignment Clauses

You may need to sublet or assign your lease as your business grows or changes. Review the lease for any restrictions on subletting or assignment, negotiate for favorable terms that allow for flexibility, and understand the procedures and requirements for subletting or assigning the lease. The ability to sublet or assign your lease can provide significant flexibility for your business.

Neglecting Exit Strategies

Consider your options for ending the lease early if necessary. Look for early termination clauses and understand the notice periods and renewal options. Review the lease for any early termination provisions and consider negotiating for more favorable exit terms. Having a clear exit strategy and knowing your options can help you make informed decisions and avoid costly mistakes.

Failing to Seek Legal Advice

Commercial lease agreements are complex legal documents, and working with experienced commercial real estate attorneys can help you avoid expensive errors. They can review the lease, negotiate terms on your behalf, and protect your interests. Seek the advice of a qualified commercial real estate attorney and rely on their advice to guide you through the leasing process. Investing in legal advice can save you significant time, money, and headaches in the long run.

Securing Your Commercial Lease: Maximizing Success in Commercial Real Estate

Understanding and avoiding the common pitfalls in commercial leases is essential for the success and growth of your business. By being aware of these potential issues, conducting thorough due diligence, negotiating key terms, and seeking the guidance of experienced legal professionals, you can confidently handle commercial real estate transactions.

If you’re considering a commercial lease or have questions about your current agreement, don’t hesitate to contact the experienced Texas attorneys at Sul Lee Law. We are ready to guide you through the process, protect your interests, and help your business thrive. Call us today for a confidential consultation about what we can do for you.

About the Author
J. Spencer Young is a Senior Associate Attorney at Sul Lee Law Firm. In assisting clients to obtain the best possible result, Spencer takes pride in working with clients and not just for them. Spencer combines his past work experience, an empathetic understanding, and an outside-the-box, yet practical approach to attack problems head-on. Born and raised in the heart of West Texas, Spencer attended the University of Texas at Austin for his undergraduate studies where he graduated with a Bachelor of Arts degree in government. Thereafter, Spencer attended Texas Tech School of Law, where he graduated in 2019. Spencer served as president of Texas Tech School of Law’s Student Bar Association and as a Board Member of the Board of Barristers. He also practiced in the School’s pro bono Civil Practice Clinic and was an active member of Texas Tech’s advocacy program. His article, You Signed What With Whom? A Comparative Analysis of the Assignability of Covenants Not to Compete was selected for publication as in Volume VI of the Tech Law Business and Bankruptcy Journal. During his time in Lubbock, Spencer also graduated with his Master in Business Administration from Texas Tech Rawls College of Business.