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Commercial leases present distinct challenges, opportunities

On Behalf of | Nov 4, 2020 | Real Estate

Business principals across Butler County and other regions spanning Pennsylvania are typically a proactive and forward-thinking group.

They have to be, of course. The commercial realm does not favor passive, ill-informed and unprepared actors. American business owners and managers forge success with their given enterprises because they act in timely and strategically sound ways.

That common mindset in the business world extends to subject matter across a wide spectrum. A company’s key decision makers must make smart choices regarding formation (entity selection). They must formulate viable business plans and negotiate and execute myriad contracts. They must marshal a productive work force and interact optimally with it. They need to anticipate third-party conflicts and, when necessary, mitigate their downsides through effective dispute-resolution techniques.

Legions of business participants deal with such matters and even additional challenges. Today’s post spotlights one particular focus that is routinely a top-tier concern in the commercial sphere.

A Pennsylvania legal source that provides an in-depth overview of business challenges and opportunities underscores that topic. It notes that, “Real estate is always complicated and always involves significant risk.”

Realty-linked issues obviously loom large in many business contexts, and certainly so for individuals/entities on both sides of a lease transaction.

The commercial lease: some important considerations

It is understatement to note that leases are notably common in the commercial realm. Purchasing property for business operations breeds often staggering costs that a business can skirt by transacting as a tenant/lessee.

Owners and managers of business properties also often favor for various reasons the leasing rather than outright sale of land and buildings.

Although such a meeting of the minds can conveniently lead to willing negotiations between landlords and prospective lessees, it hardly ensures a seamless process resulting in contract execution. There are many reasons for that, which collectively go far toward explaining why a commercial lease is quite different from its far simpler residential counterpart. Here are a representative few:

  • Legal assumption of participants’ relative sophistication, leading to fewer consumer protections
  • Highly nonstandardized terms and conditions, which can require close scrutiny and specialized knowledge
  • Negotiability extending to myriad important points (ranging broadly from lease term to rental amount)

Where proven legal counsel can offer guidance and input

An experienced real estate legal team can be a strong ally to a commercial landlord or lessee, given the clear complexity and evolving nature of commercial lease law. A practiced real estate attorney can ensure that a client duly considers and understands responsibilities relevant to key matters such as the following:

  • Factors determining rent amount
  • Future rent increases
  • Lease duration (e.g., set period versus limited duration tied to renewal option)
  • Improvements/modifications (Permitted? Who pays? Duty to restore to original condition?)
  • Use clause spelling out tenant’s allowable activities/limitations
  • Clear understanding regarding exclusivity (Will landlord be able to lease adjoining property to a business rival?)
  • Terms/conditions relevant to assignment and subletting

A commercial lease negotiation can be a challenging yet ultimately rewarding experience for a participant. Sound legal input can increase the odds for a positive outcome.