Let’s face it, leases are lengthy and confusing documents that no one wants to read thoroughly. Unfortunately, that is exactly what must be done for each and every case. Briefly combing through the different sections can prove to be an expensive mistake as there are often unnecessary and excessive costs being passed your way hidden in real estate jargon. Here are our 7 favorite things to keep an eye on when reading through commercial leases. When you see them, feel free to shout “Gotcha” – we do.
CapEx or Capital Expenditures are expenses that go towards the acquisition, upgrade, or maintenance of physical assets and often increase the overall asset’s worth when it is either of the latter two. Things happen and need action such as parking lot repairs, roof replacements, etc. But, who is responsible when it comes to these large repairs or general expenses? It may be fair for you to cover a portion of CapEx expenses over time but you don’t want to be on the hook for a large bill out of nowhere.
If your landlord is forced to make repairs to the building in order to comply with the law you should not be expected to cover those costs. Be sure that this language is articulated in your lease and that you won’t be hit with large costs to bring your landlords building up to code.
SNDA (Subordination, Non-Disturbance, and Attornment)
This very common clause ensures that if your landlord defaults and enters foreclosure that you will not need to vacate the premises. This is extremely important to look for as it protects you from a sudden move due to no fault of your own.
While many tenants have great relationships with their landlords, sometimes situations arise and the landlord will want their leases terminated. If this clause is in your lease then you have given them the right to do so and won’t have a leg to stand on.
Year over year rent typical adjusts due to a variety of reasons and becomes a bit more expensive; however, make sure there are ceilings in place that deter the price from rising too high. Also, articulate in your lease how rent increases will be calculated.
If your company, unfortunately, finds itself in a position where it can’t pay rent you may become financially responsible if this language is present. Be sure to look for this before signing any lease as the specific individual responsible can be different from lease to lease based on language.
Some business teams fluctuate quite a bit. If you think you may have extra space at some point, and would like to entertain the possibility of subleasing, be sure to look for subletting restrictions throughout your documentation.
All in all, these are just a few examples of intricate things to be on the look for when reading through your lease. Small or large lines all are in there for a specific reason, don’t be caught in a bad position because you didn’t read the fine print. If you would like an experienced team behind you that works day and night to ensure all these and more are all known – please leave a comment below.