If you are starting a new business, you have the option of either buying commercial property or leasing office space in a building intended specifically for that purpose. However, even if you are familiar with residential leases, you may not know what to expect from a commercial lease. While the two are similar in some respects, in others they are very different.
According to FindLaw, when you rent commercial property, the owner may ask for a security deposit, just as a residential landlord would. A commercial landlord will calculate the amount that you must pay monthly in rent based on square footage, and it is your responsibility to find out what is and is not included in the calculation. The rent amount may increase by a certain percentage per year, and the lease agreement should explain that.
However, there are also significant ways in which a commercial lease differs from a residential lease:
- Longer lease terms
The term of a commercial lease may be for several years. By contrast, most residential leases are only good for one year at a time before tenants must renew them.
A commercial landlord may be more willing to negotiate with you as it relates to the length of your lease, the amount you pay in rent, improvements you can make, etc. If you have concerns about your rent increasing, you may be able to negotiate a cap.
- Fewer legal protections
The law assumes that people who run businesses are better equipped to recognize and avoid deceitful landlord practices than the average consumer. Therefore, state laws that provide consumer protections to residential tenants generally do not apply to commercial leases.
When a landlord rents out commercial property, the needs of each tenant are different. Therefore, the terms of commercial leases tend to be more varied than those of residential leases.