When you sign a commercial lease, it is very important that you understand exactly what obligations you have and how the deal may change over time.
For instance, many people sign short-term leases for just a year or two, and have an option to renew the lease at that point. This gives them the confidence that they can keep the space if they want it and if it’s working out, but they’re not obligated to stay for five or more years if the business goes south. That freedom can be very convenient for new businesses.
However, the lease may stipulate that the rent will go up every time the lease gets renewed. The business owner must understand that they’re not going to sign for the exact terms that they got the last time around.
In a lot of ways, this can be a win-win for both parties. The landlord knows that they’re going to get the increases that they want. The business owner knows, at the same time, exactly what those increases are going to look like. They can budget for them and plan for the future of their company.
When this creates problems is if there is a lack of communication and everyone is not on the same page regarding the renewal policy.
If you are considering signing a commercial lease, make sure you carefully review every clause that is written into the lease and the potential ramifications of those clauses. It’s important to understand your legal options if there is ever a conflict that could impact your business.