As a business owner, signing a commercial lease is a significant financial and legal commitment. However, it’s not a “set it and forget it” decision. Just as the business landscape is continually changing, your business needs may also evolve.
An annual lease review should definitely be in your plans. To remind yourself and keep things on track, you can set the review date for the same month you originally signed the deal. You should also revisit your commercial lease whenever you have significant changes in your business, such as when you scale up or scale down or change your business model.
Your annual review should include a thorough analysis of the lease terms and conditions to ensure that they’re still in step with your business goals.
What are some things to consider during your review?
Everything in a commercial lease is negotiable, and what you need to pay attention to the most is dependent on your needs, but here are some suggestions:
- Is there a force majeure clause? These protect you against liability when unforeseen or unavoidable catastrophes interrupt your business. This could include mandatory closures due to public health concerns, fires, acts of terrorism and natural disasters like hurricanes and floods.
- Are you comfortable with the transparency level of your common area maintenance charges (CAM)? These can be significant, but you can minimize unnecessary expenses if you are permitted to look at the calculations and take a careful review.
- What are your use clauses? Before you add any new feature to your business, you need to make sure that you fully understand any exclusive use or permitted use clauses in your lease. That will help you know if you need to negotiate for changes with the landlord.
- What are the exit strategies in place? What happens if you’re unable to continue in your business? What happens if the landlord isn’t able to uphold their obligations to you? There are ways to structure a lease that can protect both sides.
When you’re reviewing your commercial lease, you don’t have to (and probably should not) do it alone. Experienced legal guidance can help.