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Spotlighting commercial lease challenges and opportunities

On Behalf of | Nov 3, 2020 | Commercial Real Estate

The commercial realm that business principals in Las Vegas and across Nevada participate in is complex, multi-faceted and constantly evolving.

Put another way: It demands foresight, entrepreneurial energy and sound decision making at every turn from owners and managers who seek to prosper within it.

Proactivity and business smarts are mandated from the very point that a powerful idea begins to take shape. Strategies surrounding company formation (entity selection) loom large at an early stage. Regulatory matters must be dealt with. Employee concerns span vast terrain. Contract negotiation and drafting is likely a top-tier focus. Dispute-resolution mechanisms must be considered and put into place.

Today’s post highlights an even additional concern that is highly relevant for a select group of commercial participants, namely, commercial lease negotiation and execution.

The commercial lease: quite unlike its residential cousin

Parties familiar with the look and feel of a standard residential lease might view a commercial lease as a document almost written in a foreign language.

For starters, there is no such thing as a “standard” commercial lease. An in-depth online overview of commercial leases notes their singularity and the “significant differences” that separate them in material ways from residential leases.

The bottom line: In the commercial realm, “terms are negotiable and vary greatly from lease to lease.” That invites timely and close scrutiny from an experienced business law/real estate attorney who has proven insight into lease particulars and structuring.

Key points that readily distinguish a commercial lease

Here are a couple fundamentally important points to note immediately about a commercial lease that renders it dissimilar from a residential lease:

  • Negotiating landlords and prospective lessees/tenants are assumed to have a base level of knowledge and business smarts not featuring in a residential context (meaning fewer legal safeguards)
  • Negotiable terms can feature across many dimensions (e.g., lease term, rent amount/future modifications, assignment and more)

In fact, the range and variety of topics that spell fertile territory in a commercial lease negotiation is impressively expansive. Landlords and lessees often focus on matters such as these:

  • Security deposit (amount, return conditions)
  • Property changes (allowable modifications, restoration to original condition and so forth)
  • Use clause (stated parameters re the activity that a tenant can engage in)
  • Lease renewal options
  • Assignment and subletting
  • Tenant exclusivity (Will landlord be allowed to lease nearby premises to a business rival?)

Those enumerated bullet points spotlight just a few representative matters that can materially feature in a commercial lease negotiation. Sound legal input into the process can help ensure that a participant’s best interests are fully promoted.