Why a commercial lease is not the same as renting an apartment

This article looks at what makes a commercial lease different from renting a residential property.

Many new business owners assume that when they are looking for commercial space that the process will be similar to finding an apartment to rent. However, as the Transactional Law Clinic at Harvard Law points out, commercial tenants enjoy fewer legal rights than residential tenants, which makes the commercial lease especially important for business owners. The commercial lease determines the rights and obligations of both the tenant and the landlord to a far greater extent than a residential lease does, which is why it is essential that special attention be paid to the details contained in a commercial lease.

What happens if the business grows?

One way commercial leases are different from residential leases is that businesses have the potential to grow or contract rapidly, meaning that they could soon need more or less space or they may need to use the existing space for a different purpose. A commercial lease should address a tenant's rights to terminate the lease or sublet it to a different tenant. It should also address what business purposes the space can be used for.

As the American Bar Association points out, many landlords of multi-tenant buildings also reserve the right to move a tenant to a different space if another tenant in the building needs to expand. Businesses looking for commercial space should ensure that the lease restricts the number of spaces that the business can be moved to and verify that the business will be compensated for having to move.

Thinking beyond the leased space

A lease should also address issues that may affect the business owner beyond the physical commercial space that is actually being leased. For example, the lease should cover both employee and customer parking for the tenant, whether the tenant can set up a sign on the exterior of the building, and whether it can use any outdoor and patio space for business purposes.

Also, business owners should watch out for what construction and repair obligations the lease puts on them. A short-term tenant, for example, should not be expected to make major renovations to the property, such as installing accessible ramps at their own expense, unless there is a valid reason for having to do so. The tenant should also check what repairs they will be expected to pay for and which ones the landlord will cover.

Getting legal advice

Keep in mind that there are many other issues that a commercial lease will need to address than are described above. The relationship between a business tenant and the landlord is governed by the lease, which is why it is essential that a lease be carefully scrutinized beforehand. An attorney should always be contacted before drafting or signing a commercial lease and such an attorney can help clients understand how to negotiate a lease that better protects their short- and long-term interests.