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Things Your Startup Business Needs to Know About Commercial Leases

— July 30, 2021

Before signing a commercial lease agreement, you must do proper extensive research about the property.

Before opening a business, signing a commercial lease is one of the most important things you have to do. A commercial lease is needed when a business rents a commercial space for the sole purpose of conducting or operating a business in it. Commercial space rental is a big expense for a small company especially if you don’t understand the hidden costs that are included in many leases.

If you are entering the world of commercial real estate, you have to understand that it is complicated and most of the time, it can take years for a business owner to find the perfect space and environment for their business. But before you sign that commercial lease, here’s some things that you need to research and consider.

Commercial lease vs. residential lease

You must know that commercial lease and residential lease are not the same. While they may have a slight similarity, a residential lease is easier to acquire. For the most part, the lessee and the landlord just have to agree about the security deposit, payment terms, the inclusions of the commercial space, how it will be used, and for how long the lease will last.

Once an agreement has been reached, the only thing left to do is sign a contract. The lessee is then allowed to occupy the space. Before signing a commercial lease, the lessee needs to consider several things including the hidden costs of the commercial space.

You must also know that a residential lease is not allowed to be used as a business lease. According to Nishank Khanna, “commercial leases are less regulated and offer less protection than residential leases.”

One more thing that you need to know is that with residential leases, the lessee is not responsible for paying property taxes. On the other hand, with commercial leases, the lessee is obliged to pay a portion of these taxes.

The usual term of a commercial lease

A typical commercial lease usually lasts from three to five years. That length of time can guarantee the return of investment to the landlord. Leases are often negotiable but for commercial leases, landlords tend to make more adjustments to commercial leases because it is for business purposes. With this, you can tell that a landlord spends more money on a commercial property than a residential property.

Rights of the lessee and the landlord

When acquiring a commercial lease, you and your landlord also need to talk about your rights as a lessee and landlord. Before signing that lease, you, as a lessee, have all the rights to question the landlord about their property. You are allowed to investigate or confirm if your landlord is the real owner of the space you’re going to rent.

In some ways, your landlord will be one of your business partners, so it is important to know their background. In some cases, if your landlord is not the owner of the building and they fail to make payment to the real owner without your knowledge, you are in danger of breaching your contract due to not paying in time.

In the same manner, the landlord can question you about your background as a lessee. They may ask you questions about your past business engagements so that they will have an idea if you can be trusted. Landlords also have the right to evict you in the event of late or unsettled payments depending on your agreement.

Rent structure

Some may turn a blind eye to this, but rent structure is one of the most important aspects of leases. By knowing what you need to pay for each month and how much it will increase every year, you can determine your budget. This also gives you the chance to fully understand the length of your stay in the commercial space. Outsourcing your bookkeeping is also important in helping you save time and money as a business owner.

Your employees’ well-being

Team doing a hands-in huddle; image by Perry Grone, via
Image by Perry Grone, via

Aside from being a lessee, you must also remember that you are a business owner. It is of utmost importance to consider an employee and family-friendly environment. Manpower is one of the most important factors of a business. If your employees feel happy and safe in their workspace, it can affect their jobs so much.

A happy employee is a productive employee. It is also important to have a family-friendly workspace because some employees are single parents and sometimes, they need to bring their kids to work. Choosing a comfortable workspace for you and your employees is one of your obligations as a boss.

Before signing a commercial lease agreement, you must do proper extensive research about the property. Make sure to investigate the location of your target space, the landlord or the owner, the zoning laws for the area, and any other tiny nuisances and environmental laws that can hinder the growth of your small business. By doing this, you are not only investing for yourself but also for the people that will work for you.

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