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What red flags should you look out for in a commercial lease?

On Behalf of | Feb 18, 2022 | Commercial Real Estate |

Before you decide to lease a particular commercial property, it is critical that you read through the proposed commercial lease agreement thoroughly to make sure it suits your needs. When doing so, there are certain things you may want to look out for that might suggest you are getting less than a fair deal.

According to CBI Commercial, a brokerage company that focuses on commercial investments, the following might signify red flags in a commercial lease agreement.

Tax-escalation provisions

A tax -escalation provision asserts that you may need to pay more for rent when in line with any tax rate changes. A tax-escalation provision alone is not necessarily cause for major concern, as these are common. However, you want to make sure you understand the terms of the provision and how much your rent could rise because of it.

Unreasonably long renewal clauses

It is often in your landlord’s interest to keep you in the commercial space as long as possible. This prevents your landlord from losing money when the space is vacant. It also means he or she does not have to spend as much time looking for new tenants. However, be wary of a lease renewal clause that states that you must stay for an additional two years or longer at a time. On that note, you may also want to think twice before signing a lease agreement in the first place that lasts longer than two years.

Other possible commercial lease red flags include vague language or a lease agreement that appears too good to be true. If it appears too good to be true, there is a good chance that it is. Remember, an agreement proposed by the commercial property owner is likely written to protect their best interests. You do not have to blindly agree to the lease as proposed. You can have it reviewed by legal counsel experienced in these matters and potentially negotiate better terms.