Commercial leases have a lot of terms that can affect how your business is run. It's important to understand them before you sign the lease so that you can make informed decisions about your business. Some common terms include term clauses, escalation clauses, and rent cap clauses. Understanding these clauses can help you negotiate better with the landlord and keep your business running smoothly. If you want to hire a professional team of commercial property lease solicitors in Manchester, visit United Solicitors.

Commercial Real Estate Rent Clauses

  • If you are renting or purchasing a commercial space, there are a number of important clauses that can affect your business. In addition to governing the terms of your lease, these clauses also serve to protect both parties from potential disputes.
  • One of the most common commercial lease clauses is the rent escalation clause. These clauses specify how often and by how much a lease will increase over time, which is vital for both landlords and tenants.
  • Escalation clauses may be either inflation-indexed or fixed percentage. Inflation-indexed rent escalation clauses are based on the Consumer Price Index (CPI) and generally have a cap of 3%.
  • These clauses are a great way for landlords to keep up with inflation and remain competitive in the market. Additionally, they can also help incentivize tenants to sign a lease agreement by ensuring that their rent will not go up too drastically.
  • Typically, these clauses come with a renewal option. This allows the tenant to renew their lease if they want to stay in the property for an extended period of time.
  • This is important because it protects the tenant from paying over-the-market rent rates and allows the landlord to get back their investment. It also ensures that the tenant has some negotiation leverage in unfavorable economic conditions.
  • Another popular clause is the percentage rent clause. This clause is often used in retail leases, and it requires a percentage of gross sales to be shared with the landlord. It is important to track these numbers and make sure that you are complying with the lease agreement.
  • Finally, some commercial leases include an option to purchase. This is not mandatory, but it can be a good clause to have in your lease.

Commercial Real Estate Use Clauses

Whether you’re a landlord or a tenant, commercial real estate leases are often subject to use and exclusivity clauses that can affect how your business operates. These clauses are generally included to protect both parties from infringement by other tenants or to limit the property’s use as it relates to state and local laws and regulations.

  • A common type of use restriction in a commercial lease is called a restrictive clause, which prohibits tenants from engaging in certain activities. This can be a major disadvantage since it can put you in a very limited line of business.
  • Another type of use clause is a permissive one, which states how a tenant can use the space. This can be helpful if you’re trying to avoid overly restrictive restrictions, but it can also make you box yourself in a very narrow line of business.
  • These limitations can be as broad as what business you can conduct, as narrow as the specific products and services that you can offer, or as nebulous as the quality level of your operation. Regardless of the limitations, it’s important to read the lease carefully to ensure that your use is not prohibited.
  • If you’re interested in exclusive use, it’s essential that you negotiate this term before signing a lease. This will prevent you from losing your business to competitors who rent space in the same building or shopping center as yours.
  • Another common use restriction in a commercial lease is an escalation clause, which increases the rent over time. This can be very disruptive to your operations and may require the assistance of a solicitor. commercial property lease solicitors by United Solicitors are the best and most affordable option for you.

Dispute Resolution Rules

  • Commercial leases are unique to each property, and they need clauses that address specific issues and concerns of the parties involved. Disputes can arise over interpretations of the terms, changes in conditions, material or minor breaches, and termination of the contract.
  • These disputes often involve large amounts of money, which is why many commercial real estate leases include dispute resolution rules. Usually, these rules mandate mediation or arbitration as the preferred method of dispute resolution before filing in court.
  • In addition to preventing litigation, these rules are also time-saving and cost-effective. By allowing the parties more control over the dispute resolution process, they can often find solutions that benefit both sides without lengthy and costly court battles.
  • If a dispute arises between you and your landlord over the rental rate or other lease terms, arbitration and mediation are quick and inexpensive methods of resolution. They can also keep the process confidential, which is helpful for both parties’ reputations and the integrity of the business relationship.
  • Moreover, many businesses are reluctant to enter into a litigation battle because of the negative effect it can have on their reputation. In contrast, mediation is a collaborative process where both parties are treated as equals and work toward a solution that benefits both parties' interests.
  • NCR, for example, has a strict policy that requires all of its commercial contracts to include a clause that states that alternative dispute resolution (ADR) will be the first option in the event of a disagreement. It also requires staff ombudspersons to review all claims and determine whether they should be arbitrated or litigated. Those ombudspersons are trained in problem-solving, negotiation, and dispute resolution.

Personal Guarantees

  • Many small business owners are surprised to learn that commercial landlords often require personal guarantees on leases. Traditionally, these clauses were optional, but hard times in the commercial real estate market have changed that.
  • The main reason that landlords want a personal guarantee is that it allows them to collect rent from the tenant even if the business fails. Without a personal guarantee, the landlord could lose all of the money owed for the leased space in the event that the company failed to pay rent.
  • This can leave the landlord with little money to cover the remaining balance on the lease, and the tenant may also be unable to pay any of the fees for common area maintenance (CAM) or tenant improvements (TI). As such, personal guarantees have become increasingly popular in commercial leases since 2008.
  • If your business runs into financial trouble, it’s important to know what your options are. One option is to ask your landlord to allow you to renegotiate the terms of the personal guarantee. Another option is to simply bail on the lease, but it’s a good idea to discuss this with an experienced commercial solicitor before you do so.
  • Other options include asking for a time limit on the personal guarantee. Some lenders will only require a guarantee for a certain period, such as two or three years.
  • In addition, if the business shows positive profits after a year or two, you may be able to request that the personal guarantee be removed.

Commercial Real Estate Law Negotiation Services

  • When a business owner leases space, they need to be sure that the terms of the lease are in their best interest. A commercial real estate solicitor can help you understand the legal terms of your lease and negotiate for better terms.
  • A commercial real estate solicitor will also make sure that you are not getting a lease that can be used against you in the future. They will be able to negotiate for clauses that protect you from landlords who want to raise your rent and fees in the future.
  • The type of commercial space you are leasing can also affect the terms of your lease. For instance, if you are leasing a retail space, you will need to pay special attention to the number of signage rights you have.
  • Another type of clause that you will need to look out for is one that allows the landlord to increase your rent and fees without any notice. This clause is often a sign that the landlord does not care about your business or wants to exploit you.
  • You should also try to work out a cap on the amount of increases that you can be charged. This will help to keep your business from having to move because of a lack of money.
  • Finally, you should always remember that the business you are negotiating with is in business to make money, too. That is why it is important to treat them with respect at all times. This will not only benefit your business but will also help to get you a better deal in the long run. 

  • United Solicitors offer cheap commercial property lease solicitors in Manchester; go to website