Uncovering the Hidden Costs in Commercial Leasing

A landlord is a landlord. A tenant is a landlord's source of income.  All that is required is a signature.  This may sound like oversimplification, but if you are considering moving your home office into a commercial space, the language appearing above that signature is what it all comes down to, for both you and your future landlord.  To be skilled in the use of this language is the key to your success.  The lease language enables the landlord to pad many of the charges laid before you.  His or her definition of the space you wish to rent will ultimately be what you pay for.  You must realize that you do not have to accept his or her definitions.  So, make sure your John Hancock does not appear anywhere near the lease until you enlist the services of an experienced real estate attorney.  In the meantime, it is always a good idea for any business owner to be up to speed on the hidden costs in commercial leasing.  Here, we will take a brief tour of some of the most common examples.

PRE-EXISTING CONDITIONS

Let us start with something familiar.  If you have ever rented so much as a studio apartment, you know that you are expected to leave everything as you found it once your lease is finished.  Commercial leasing is no different.  So, be sure that there is a clear understanding as to precisely what "as you found it" means.  For example, does it mean that any additions that you have made will have to be removed? Just remember that the space is defined by the language in the lease and not your initial perception of the place.  Do not even begin to return everything to its former state unless you are clear on the landlord's requirements.

UPGRADES

Mind your upgrades.  Well before you are open for business, there may be all sorts of improvements and additions that must be made.  Some may be dictated by law, such as fire sprinklers or handicapped facilities.  Others may be cosmetic or required by your specific business needs.  Keep track of all of it because you can rest assured that your lease has already anticipated this.  All too often, business owners make it as far as assessing initial costs and rent, but lack the foresight to consider any necessary upgrades. These expenses sneak up and attach themselves to the monthly rent, straining a business’s bottom line.

ELECTRICITY

One outage is all it takes to remind any business owner what it truly means to be powerless.  Once the ability to accept credit cards goes and handwritten signs go up that say "cash only," electricity becomes the new boss.  Still, tenants have an advantage in this power play when they review their lease.  Do not give it up by being careless.  There are two essential details to look out for when it comes to electricity.  Some leases will base your monthly electric bill on maximum usage, regardless of actual usage.  Others may reserve the right to conduct a survey that determines actual usage in any given month.  You simply want to know how the cost of electricity will be regulated.

PROPERTY TAXES

You may be under the impression that you are only responsible for the space you are renting, but landlords can include property taxes in the lease.  Be mindful of that.

MAINTENANCE

Shoveling snow, mowing the lawn and repaving driveways are unavoidable realities of owning any property.  Back when you rented your first apartment, you may have been relieved to learn that someone else was responsible for these chores.  Do not carry that notion over to your new business venture.  Yet another cost a landlord can and will share with you is the regular upkeep of the property. Regardless of who performs the service, the range of costs represented by this clause can make or break you.

No costs are hidden to an experienced commercial real estate attorney.  His or her expertise is an industrial grade flashlight that shines on all language, no matter how obscure.  Comparison shopping when it comes to commercial real estate is not something that should be done without a reputable real estate agent and attorney.  Feel free to contact the Law Office of H. Benjamin Sharlin LLC for a free consultation before you consider signing your commercial lease. 

Please be advised that this blog is for informational purposes only, is not legal advice and does not create an attorney-client relationship.