5 commercial lease red flags to watch out for

On Behalf of | Aug 21, 2023 | Commercial Real Estate Leases | 0 comments

Sometimes, one of the contributing factors to a business’s success is choosing the right place to set up shop. Some locations seem ideal, leaving business owners feeling confident before signing the commercial lease agreement. Still, they should be cautious, or they might overlook obvious red flags that could lead to issues after signing the contract.

Whether short or long-term, the lease agreement could be binding, tying tenants to obligations listed on the contract. Fortunately, they could avoid these issues by looking out for red flags before signing the agreement, including the following:

  • Perfect leases that are too good to be true: If a lease seems too favorable, it might be worth investigating if there are any issues with the property or the neighborhood.
  • Provisions potentially impacting rent costs: These concerns could include tax escalation provisions that could put too much financial burden on the tenant. If unavoidable, tenants could ask for more reasonable arrangements regarding additional rent.
  • Clauses leading to unreasonable renewal commitments: Tenants could address these intervals based on their business requirements.
  • Vague language, terms and obligations: Unclear clauses and conditions are red flags in any agreement, especially for leases requiring a high commitment level.
  • Lacking or messy documentation: Only proper paperwork could legitimize a deal between a landlord and a tenant. The deal might not be worth it if the agreement or property relies on verbal correspondence and disorganized documentation.

These red flags do not automatically lead to significant issues. However, they could be worth looking into before signing the commercial lease agreement.

Addressing commercial lease red flags

It is usual for landlords and tenants to discuss these concerns as needed. However, it might be challenging without the experience of a legal professional specializing in real estate.

Seeking reliable legal services could be beneficial when dealing with commercial lease agreements and negotiations. Doing so could help navigate discussions and address red flags as they appear.