In 2024, office vacancy rates continue to prove a struggle for property owners. As an increasing number of businesses turn to remote labor, real estate investors need to analyze their lease agreements and come up with something favorable for both parties.
The lease agreement determines whether or not an individual agrees to use your property and if it's worth staying there long-term. At the same time, the owner of said property needs to profit from the agreement to stay in business.
Here are five key elements of commercial lease agreements to consider.
1. Lease Term and Renewal Options
One of the most important lease agreement basics is the length of the agreement. As the landlord, you want to establish a clear start and end date for the tenant's stay. The lease term can range from one to ten years or even shorter.
Determining the term and potential renewal options is a key part of lease negotiations.
2. Rent and Other Expenses
Next, you'll want to iron out leasing essentials such as rent and any additional expenses.
For example, there may be provisions for common area maintenance charges or pet fees. Some landlords cover part of the utilities, while others cover none of them. The expectations vary based on your priorities as an investor.
3. Property Use
Some good lease negotiation tips should include what the property is intended for. Clearly define the permitted use of the property, which should partially be dictated by your city's zoning laws.
The last thing you want is for a business to rent out some of its back rooms and open you up for a lawsuit.
On top of that, you may want to establish an exclusivity clause to prevent issues such as competitors leasing spaces directly next to each other. This way neither tenant can interfere with the other's business interests.
4. Maintenance and Repairs
Commercial leasing tips should also cover who handles different maintenance areas and repairs.
At the very least, the property owner or manager is responsible for the structural integrity of the building. They handle the utilities, HVAC systems, and electrical work.
The tenants should keep the property clean and in good condition. They may need to perform routine maintenance. It all depends on the specific lease details.
5. Termination and Default Provisions
Know the conditions under which you can terminate a lease, including what constitutes a default.
A monetary default occurs when a tenant fails to pay their rent or other fees. Non-monetary defaults happen when they breach the terms of their lease, such as allowing someone to live on a business property.
Create Reliable Commercial Lease Agreements
Your commercial lease agreements are some of the most important parts of renting out your properties. You'll want to make sure that they protect you, the property owner, while holding your tenants accountable for how they use the space.
PMI Expert PB provides property management services for the Boynton Beach area. We're part of an almost 20-year-old franchise spanning the country. Schedule a consultation to learn more and tell us about your commercial property.
