Essential Provisions in a Commercial Lease
When signing a commercial lease, it is essential to understand and agree to all of the provisions. The provisions in a commercial lease are usually designed to favor the landlord; however, a landlord may be willing to negotiate. An experienced real estate attorney should be consulted before entering a commercial lease. Here are a few essential terms that should be clearly understood prior to signing:
Term – A short-term lease provides a tenant with more flexibility for changing needs. The tenant may decide on a change of location or a space with more or less square footage. If a tenant is confident in the location they are choosing, it may be advantageous to negotiate a long-term lease. With a long-term lease, the tenant does not have to worry about the landlord renewing the lease and may receive a better rent payment or other concessions. An additional option is to negotiate a short-term lease with an option to extend or renew when the tenant is unsure whether the location will be a good fit. While an extension gives the existing lease a new end date, a renewal results in both a new beginning and end date.
Rent – Negotiating the rent in a commercial lease largely depends on the market. If the market is strong, a landlord is unlikely to reduce rent payments. Additionally, landlords may try to include annual increases to rent in the lease terms. A tenant should negotiate any proposed annual rent increases. The tenant may want to insist on the elimination of such a clause, get a cap on annual rent increases, or exclude rent increases in certain years. Another consideration is a gross lease vs. a net lease. A gross lease includes the costs of utilities, repairs, taxes, and insurance. A net lease does not include these costs and a tenant may prefer to negotiate a higher rent to eliminate responsibility for these potentially large costs.
Quiet Enjoyment – In the absence of an express agreement to the contrary, the landlord impliedly covenants to protect the tenant from removal by anyone having an interest in the premises that is superior to the interest of the landlord. A tenant should consider including a covenant of quiet enjoyment and removing any contrary express agreement before signing a lease. Violation of the express covenant of quiet enjoyment has been found to constitute constructive eviction, permitting the tenant to vacate the premises without liability.
Repair and Maintenance – In the absence of an express agreement to the contrary, the landlord has no obligation for repairs. The tenant must maintain the premises in the same condition as when the lease started. If not negotiated otherwise, the tenant may be required to repair the roof, windows, and doors to prevent intrusion of the elements. A tenant should include an express provision that the landlord is responsible for repairs. If a tenant follows notice procedures when a landlord fails to make repairs, a tenant may withhold rental payments and eventually may terminate the lease under Fla. Stat. 83.201.
Condition of Premises – In an absence of an express agreement to the contrary, the landlord has no liability for the condition of the premises. There is no implied warranty of habitability or fitness for use. A commercial tenant should be cautious when inspecting the premises. The tenant should ensure that the property is in useable condition for the intended purpose. An express provision should be drafted if the tenant wants the landlord to fix a condition of the premises.