Commercial Real Estate
Protecting your interests
The Right Terms for a long-term deal
At Waldrop & Colvin, we represent businesses from launch to maturity. Obtaining a commercial space is big step for any entrepreneur. When it comes to commercial real estate, we excel at helping businesses negotiate the right terms. An investment in legal support can pay dividends in terms of limiting expenses and potential exposure.
In fact, the commercial lease is often one of the most important contracts that effect your business.
The lease protects your rights to use the space and imposes certain restrictions or duties upon you as the tenant. Typically, the commercial lease process starts with a template lease agreement prepared by the landlord. Naturally, the terms are often one-side and thats not in favor of the tenant. Negotiating a fair and balanced lease requires a partnership between business and legal. Its important to plan for success and work with an attorney who understands what matters to you.
We work with clients to understand their objectives and work within their budget to craft a more moderate lease, focusing on the big-picture items.
Commercial Leases Come in Various Forms
There are various forms of commercial lease options available. The terminology and options can often be confusing to a first-time commercial tenant. The various types of lease agreements are intended to account for diverse business needs of landlords and tenants. The most frequently encountered commercial leases are:
A gross lease is a full-service lease where the landlord covers most of the operating expenses of the building in exchange for a fixed rental amount.
In a net lease the tenant pays a fixed base rent amount plus some or all of the property’s operating expenses. Net leases come in three forms:
- Single Net Lease (N Lease): Base rent + property tax.
- Double Net Lease (NN Lease): Base rent + property taxes + insurance
- Triple Net Lease (NNN Lease): Base rent + property taxes + insurance + maintenance costs (often referred to as CAM or common area maintenance)
In a percentage lease, the tenant pays a dynamic rent amount based on a fixed based rent plus a percentage of gross sales. The percentage may be fixed or variable.
Modified Gross Lease
A modified gross lease is a hybrid approach where the lease contains elements of both a gross and net lease.
In a ground lease the tenant only leases the land and is responsible for constructing any structures on the property.
The type of commercial lease often depends on the needs and preferences of both the landlord and the tenant, as well as the specific characteristics of the commercial property and the nature of the business being operated by the tenant. It is also important to consider the right term length. A short-term lease provides flexibility, but it often involves higher rental rates. A long-term lease provides stability for both parties, but can be increase exposure for a new business. Its best to obtain legal and financial advice before entering into a commercial lease agreement. Commercial. landlords typically require a personal guaranty for small business owners, and its important to understand the implications of the business and legal terms.