Q: What are the top red flags for tenants in commercial leases?
Adrianna Inneo May 13, 2023
This article was originally published by The Hamilton Spectator.
Q: What are the top red flags for tenants in commercial leases?
A: The premises a business operates on can be fundamental to its success and rent is often one of its biggest expenses. accordingly, below are some of the top red flags for tenants to avoid when entering into a commercial lease agreement:
1. Vague language: Leases should be clear and fulsome, especially when discussing rent, any additional expenses the landlord and tenant are each responsible for, the terms for renewal and the events that will be considered a default. Tenants should also be cautious about making agreements that are not explicitly included in the lease and should avoid relying on trust or promises that are not in writing.
2. Provisions with harsh consequences: Clauses that provide a landlord with broad rights, such as those that permit termination or relocation in certain circumstances, could cause a significant disruption to the tenant’s operations. Regardless of what might be said about the likelihood of utilizing these provisions, tenants should be cautious of agreeing to them.
3. Absence of a “No Competitor” clause: Without such a clause, a landlord could rent space in the building or complex to a business that provides similar products or services to the other tenant(s), which would negatively affect the profitability of those tenant(s).
A commercial lease is a major component of operating a business. Seeking legal advice regarding the preparation or review of commercial leases is highly recommended in order to avoid unnecessary risks. Feel free to reach out if we can be of assistance.
While some disputes are unavoidable, addressing them appropriately can protect the future of your business. If you find yourself in a dispute, reach out to a member of the Ross & McBride team for help.
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