If you’re signing your first commercial lease, it can be overwhelming. These are typically very long documents. Because they’re drawn up by the property owner, they’ll likely favor them. That’s why you need to know what you’re agreeing to and be ready to negotiate modifications if you are concerned that any of the terms could hurt your ability to run your business as you want to.
Among the clauses you’ll typically see are the following:
- Rent escalation
- Improvements and alterations
These last two may sound similar, but they address very different matters.
What are use clauses
The use clause basically places limitations on how you can use the space you’re leasing. Some use clauses are very restrictive, while others are less so.
Use clauses can restrict things like what kind of products or services you can offer, what kind of signage you can have in your windows or outside your space, the hours you can be open and more. Just be sure that there’s nothing in there that would interfere with your ability to run a successful business. If there is, see if it’s negotiable.
What are exclusive use clauses
Exclusive use clauses generally benefit the leasee. If you don’t see an exclusive use clause, you may need to ask for one. It prevents a competitor of yours from being able to lease space in the same building or complex.
If you’re a brand-new business, you likely aren’t going to be able to demand an excusive use clause unless you’re leasing a considerable portion of the property. Long-term, successful tenants have a better chance of getting an exclusive use clause.
Remember that you’ll likely need to live with the terms of the lease for at least the next year — and probably longer. That’s why it’s crucial to have experienced legal guidance as you review and negotiate it.