Finding the right space to operate your business is crucial. It can affect everything from your monthly costs to the image you present to employees, customers and clients. With so much dependent on where you open or move your business, any disruption in your space can have costly consequences.
Therefore, it is crucial to have a valid commercial lease agreement in place when you rent space for your business. The contract should include direct, clear guidance on the term, responsibilities and costs for the leased space. Failure to have such language could result in loss of space and consequences for your business and other parties.
Lease termination leaves customers scrambling
For one example of how dramatically lease problems can affect others, we can look at a case involving a local daycare and the owners of the property.
According to reports, the landlord and tenant signed an agreement terminating the lease due to fire code violations. The tenant, a daycare, was to vacate the space by the end of the year, though it informed its clients that it was going to obtain an extension, citing promises to install a new sprinkler system.
However, the code violations persisted, a new system was not installed, and the daycare never obtained an extension. With just days left in the year, the daycare operators announced to families that it would be closing immediately due to the termination agreement. Not only did the business have to close its doors, but the closing left dozens of families without childcare.
Preventing similar scenarios
There are numerous ways business owners could avoid running into a similar scenario, many of which include reviewing the lease and setting expectations from the beginning.
For instance, in terms of making repairs and updating equipment, the parties should clearly address in the lease who is responsible: the landlord or the tenant. If the responsible party does not make repairs, the penalties or cure options should be specific.
It is also crucial to understand and comply with deadlines in a commercial lease. The dates and obligations should be specific and enforceable. If they are not, parties may not be fully aware of what might happen if they do not pay on time, pursue extensions or perform contractual obligations in a timely manner.
Before you sign a commercial lease agreement, you would be wise to review it with an attorney to ensure it includes these elements.