admin / February 27, 2019
What you shoud know before you sign a lease
WHAT IS THE TERM OF THE LEASE?
Choose the duration of time that best suits your needs, that is your expected stay. Many people choose longer lease terms to protect themselves against the effects of inflation. if there’s an inflationary clause, beware of long term leases. Most manufacturers prefer longer term leases due to the cost of moving, permitting process and operationally, is it coast prohibitive to pick up and move manufacturing equipment.
WHAT’S INCLUDED IN THE RENT?
Gross Leases include building operating expenses, taxes, insurance and repairs but may not include heat and electricity. if you’re paying higher than the going rate, a gross lease is your best option. Net Leases require tenants to pay for real estate taxes in addition to rent. Net-Net Leases require tenants to pay real estate taxes and insurance. Net-Net-Net(Triple Net) Leases pass on all operating expenses to the tenant.
HOW MUCH CAN THE RENT INCREASE?
Often landlords include ‘escalation’ clauses. These allow for a rent increase every year every 5 years. Be certain to factor this rental increase into your operating budget.
CAN YOU SUBLEASE?
Landlords would like to control and determine sublease parameters. Be certain to ask who keeps the profits if your new sub-tenant pays more in rent than you. Do not restrict yourself to approved uses and financial new worth of prospective sub-tenant. Keep your sub-lease options as flexible as possible.
CAN YOU RENEW YOUR LEASE?
Before signing on the first lease agreement, confirm that a clause exists for optional renewal should you wish to stay longer than the duration of the first lease period. Be certain you understand how much notice is required so the lease does not renew automatically or terminate without your written confirmation in either scenario.
WHAT HAPPENS IF YOUR LANDLORD CAN’T PAY THE MORTGAGE?
If the bank forecloses on your landlord, your lease may be void. To protect yourself, be sure your lease has a ‘recognition’ or non-disturbance clause.
WHO IS RESPONSIBLE FOR INSURANCE?
Ask an insurance attorney to verify all the landlord and tenant policies dovetail. Insufficient coverage or overlapping policies can cause significant delays in payments to you if insurance companies must first sort out claims for covered and non-covered damages.
WHAT BUILDING SERVICES ARE INCLUDED IN THE LEASE?
It is best if your lease details services, electrical capacity, and a schedule or HVAC operation, including provisions for weekend and holiday needs. The lease should also state what landscaping, elevator, trash and other services are included and what is excluded.
WHO PAYS FOR TENANT IMPROVEMENTS?
The answer to this is often a result of tenant-landlord negotiations. Industrial real estate agent and general contractor can provide direction with Tenant Improvement costs, allowances, timing and permitting processes.
TENANT IMPROVEMENTS. WHO DECIDES?
Prior to signing the lease, record where utilities will be brought in, the location of water and sewage lines, how much lighting is included, and if you have control over their placement, etc.
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