When it comes to commercial leases, don’t ignore the fine print!By: Rose Massary

So, you found your new office space in New York City.  You considered some helpful tips during the process and maybe even engaged an experienced broker to help negotiate the main deal terms.  You think you’re ready to sign on the dotted line.  But, wait!  As with all business contracts, never ignore the details of a commercial Agreement of Lease.  Before signing, take a close look and consider the implications the lease terms could have on your small- or mid-sized business (SMB). 

Use of the Space

A “use” clause is a very important provision that states exactly what you are permitted to do in the space.  Landlords can use these clauses to limit the activity in the building or regulate the type of businesses on their property.

Before agreeing to a specific use for your new office space, think about the future of your business.  The broader the permitted use is for the space, the greater the ability for your business to grow within it.   If the business is likely to expand, you should ensure that it is able to do so without violating the terms of the lease.

The use of the space may also be limited by law.  Be sure to check the:

You should confirm that you have obtained all permissions and licenses required to occupy the space in accordance with the lease and applicable law.

Limitations on Alterations

Some commercial leases limit ordinary changes to the property, such as painting, drilling holes, installing signs and banners and even certain technological services.  If particular alterations are necessary to meet your business needs, address them with the landlord and request appropriate changes to the contract.

Repairs & Maintenance

Unlike residential leases, the tenant of a commercial space is sometimes responsible for maintenance and repairs.  Look closely at the maintenance provisions of the agreement.  If they are the responsibility of the tenant, try to negotiate certain repairs be made by the landlord prior to move-in; this could help you avoid the burden in the future.  If the lease is ambiguous, request clarification.  A detailed list of responsibilities could aid in budgeting your business’s finances for future property expenses.

Insurance

Many commercial leases obligate the tenant to obtain certain coverage, such as property and liability insurance.  Review the insurance provisions carefully to determine if what’s required is applicable to your business.  If so, is the necessary coverage economically feasible for your SMB?

Although your commercial lease may be a long and complicated document, don’t assume it is standard and customary.  Thoroughly review the details to ensure that the terms are reasonable and fit the needs of your business.

What lease provision is most important to you?

Contributing Editor: Jessica Cox

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Rose Massary

Associate Attorney

(212) 865-9848

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