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What are the main terms to review in a building lease?

Great question as I’ve heard many horror stories of tenants being stuck in unfair leases. Although I think having an attorney check over your agreement would be your best play, here are some general provisions to look out for in your lease:

  • Rent – how and when to pay and the ramifications for failing to abide by those directives
  • Security Deposit – should specify if interest accrues on the security deposit, which bank will hold the deposit in escrow, and whether it will it be refunded or credited to the rent over time.
  • Term – when the lease begins (typically the execution date) and when it will end. If the tenant conducts business in the space before the specified term begins, then the term begins on that first day of business.
  • Term Renewal – look out for the difference between a renewal and an extension in this provision. A renewal requires executing another lease when the former expires. An extension is merely a continuation of the prior lease. Thus, if there is something in the former lease that is disadvantageous to you then make sure you renegotiate and not opt to “extend” your lease.
  • Utilities / Taxes – take a look at the provision to see which costs pass through to the tenant. It’s important to note that both parties must agree on what to do in the event of a breakdown of any utilities or conditions. That being said, a landlord may include an indemnification clause that protects them from liability in the event of interruption of utilities. If your company really relies on a certain utility then you probably want to renegotiate.
  • Assigning / Subletting – the lease will often prohibit or limit the tenant’s ability to sublease or assign the lease. However, if the lease devoid on the issue, then it is treated as permission to sublease or assign; the tenant may then may sublease or assign whenever it wants without the landlord’s approval.

We can help you over at LawTrades! Our marketplace of affordable and experienced attorneys can review your building lease for a flat-fee to ensure your company has a secure place to conduct business in. Hope this was helpful!

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