Owning your own business can be an excellent and very profitable way to earn a living. If you own your own business, one of the first things you will need is a space in which to run your commercial property. Leasing such a space can be easy, as long as you know the basics. Although each lease may be slightly different, all of them contain and cover a core group of issues that every business owner should know about.
The first basic idea of commercial property leasing is that the lease should clearly designate and define the space that you will be renting. This includes both a street address, a site plan (which resembles a blueprint), and the square footage of the location. Make sure that the lease describes the space particularly, and also make sure that the premises match the description and specifications given in the lease. This can become important if a boundary dispute or other legal issue arises later on.
Another issue to look for is what type of lease you have secured for your premises. Leases come in two forms, a gross lease and a net lease. A gross lease is a single-sum, all-inclusive lease. This means that the tenant will pay one lump sum to the landlord each month. In turn, the landlord is then responsible for paying property taxes, insurance, and maintenance fees, such as repairs.
In contrast, a net lease involves the tenant paying several different sums to the landlord every month. In addition to the set rental amount, he will also pay a portion of the insurance, maintenance fees, utility expenses, and property taxes. Understanding the difference between the two types of leases is important when comparing different potential spaces, because you want to be sure you’re making the most accurate comparison possible.
A third issue inherent in commercial property leasing is the scope of the activities that are permissible in the space you have rented. Leases can often contain provisions and limitations that will exclude certain ways to use a building or lot. For example, the lease may say that the building may only be used for “general office use.” This is fine if you wish to run an office, but will likely prohibit you from running a retail establishment.
Leases for retail establishments also generally contain a number of specific limiting provisions. For example, the lease may contain a provision prohibiting the sale of certain items. If you wish to operate a retail establishment, an important thing to look for is whether your lease contains an “exclusivity” clause, which will give you the exclusive right to operate your type of business in the shopping center or mall. If the lease does not, other businesses of the same type may lease property in the same mall and compete with your business.