Most of our commercial tenant clients did not take reading the lease seriously. They assumed that this allowed for what they had in mind and that if a problem arose, the landlord would treat it wisely. That`s not how it happened. Now they need to hire a lawyer to undo the chaos. Learn from them. Avoid problems. There is no such thing as a “standard” commercial lease, although most are entitled to suggest that everyone signs the same lease, and there is nothing unusual about it. The whole idea of having a “standard” lease with sides of small “boilerplate” characters to take or leave is to dominate the situation. If you do not want to question or change the conditions, the lease greatly favors the landlord. Even the spaces to be initialized are not represented as options that you might reject. They are meant to prove that you are reading them.
A landlord and its representatives are prohibited from requiring commercial tenants to provide “key money” as a condition of entering into, admitting or renewing a lease. “Key money” is a term used to describe bribes and other forms of payments under the table to landlords in exchange for renting a property. A commercial tenant is entitled to the triple damage caused by the refusal of rent when asked to pay the key money. A commercial lease can contain virtually any other condition that the landlord and tenant agree to. In general, everything contained in a commercial lease is enforceable unless it is illegal or the clause is too vague for a court to enforce. Since the owner owns the building, he will often take out insurance in the event of fire, flood or other disasters. However, some commercial leases pass these costs directly on to the tenant instead of including them in the rent. “C.P.I.” [Abbreviation for consumer price index] is the measure of inflation. It is used in long-term commercial leases to adjust the annual rent to inflation rates so that your landlord gets more money. If you paid $1,000 a month in rent this year and the CPI is 4%, you will pay $1,040 next year. The U.S.
Department of Labor publishes cpi information, usually about 2 months later. You can have a copy sent to you with a telephone request. You call the number on the rental panel. After a few minutes of taking a look at the layout of the rented space, say, “OK, I`ll take it.” You find yourself in a room with the rental agent. Most of the interview is about whether you are “eligible” as a tenant, not whether the lease or commercial space is achieving your goals. You will eventually receive the lease for signature. Rent control or capping rents and rent increases in a given area does not apply to commercial real estate. So if you sign a commercial lease in a rental control city like San Francisco, you shouldn`t expect to get that protection. The reason for this is that while rent control is beneficial for residential tenants, it does not promote a competitive environment for businesses and could give one company an unfair advantage over another.
However, commercial owners may voluntarily enter into a capped rental agreement with the public authorities. The special rights available to residential tenants are not extended to commercial tenants who are considered demanding, strong and do not need to be protected by law. With the exception of the huge tenant of the business, such as the main tenant in a shopping mall, the owner has his say, from the beginning and long after the end. As a result, commercial tenants are more vulnerable and abused than residential tenants. Normally, in the case of a monthly rental, the rent can be increased with 30 days` notice. However, due to the current wave of rent increases that came into effect on January 1, 2001, a new law requires 60 days` notice if the rent increase results in increases of more than 10% in that year. The idea is to give tenants the ability to adapt to soaring rent increases, but not to stop them. The calculation is a bit strange; It doesn`t have to be a big rent increase at a time, just the sum of the increases over a year.
This new law will mainly affect high rents, which also have much larger proportional increases. Moreover, these are not annual leases, but only monthly [or shorter] rentals. This law expires automatically in 2006, unless the legislator extends the deadline or makes it permanent. If you have rent increases in your lease, this new law does not affect you. A big catch that commercial tenants encounter is the vague option in their lease “at a new rent that needs to be negotiated.” What`s wrong with that? For example, you would complete 5 successful years of building your business there and you would expect to renew your lease for another 5 years, only to find that your landlord refuses to renew your lease unless they receive double rent. There is no negotiation, only submission. If you don`t pay what the landlord charges, even if it`s higher than the market rent, you`re out. .