Commercial leases can be complex documents, but it’s crucial for property owners to understand the importance of certain key clauses. In this post, we’ll explore some of the most significant clauses to ensure that you’re making the most beneficial choices for your leases.
- Governing Law
The governing law clause designates which state or jurisdiction’s laws will apply to the lease, and it’s essential to understand how these laws can vary significantly from state to state. As an owner, you have the option to choose the governing law that is most beneficial to your property. It’s important to research and understand the differences between various state laws before making a decision.
- Improvements and Alterations
In today’s competitive commercial property market, tenants often require alterations to the space before moving in. The improvements and alterations clause outlines the changes you’re willing to make to the space, who will pay for the improvements and the terms of payment. It’s also important to include a process for gaining approval for future tenant alterations.
- Subleasing
With the rise of remote work, some tenants may want to sublease a portion of their space to another tenant. The subleasing clause outlines whether or not this is allowed and any specific restrictions, creating a process for seeking approval to sublet.
- Rent Escalation
Consumer prices are increasing, and the biggest jump in inflation in three decades means that it costs more to maintain your property. A rent escalation clause outlines how and when rent will increase for your tenants, providing an insurance policy of sorts in volatile economic conditions.
- Merger
The merger clause ensures that all enforceable agreements between parties are included in one singular document, protecting everyone involved. It’s important to include every agreement with a tenant inside the body of the lease.
- Tenant Self-Help
When property owners don’t take corrective actions, the tenant self-help clause outlines when renters can take matters into their own hands. This clause outlines which expenses are reimbursable when repayment should occur, and the situations in which self-help is allowed.
- Dispute Resolution
The dispute resolution clause outlines how to resolve disagreements between property owners and tenants. This type of approach can potentially reduce the cost and time involved with a lawsuit, assigning responsibility for litigation costs.
Each of these clauses is crucial to the success of a commercial lease agreement, and it’s important to carefully consider and scrutinize them when writing and reviewing leases. If commercial leasing or tenant issues are a concern, reach out to the professionals at Cushman & Wakefield | Commercial Property Southwest Florida. Our full-service property management team has the knowledge and experience to keep your commercial property running efficiently and profitably. To learn more, call us at 239-489-3600 or fill out the form on our website.
