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Making sense of your new commercial lease agreement

Signing a commercial lease for a new property is always an exciting prospect. Perhaps your business started off in your garage or basement, and now you’re finally ready to expand into your own facility. Maybe you’re finally able to start producing some of your own components in-house, or you just need more space as you add more office staff to your company.

Much like residential leases, commercial leases outline the responsibilities of both tenants and landlords. Unlike a residential lease, however, there are often more obligations to the tenants in commercial leases, from charges like CAM fees to extended lease terms. While month-to-month or single year leases are common in residential rentals, for commercial spaces, leases often run several years. It’s critical that you understand what you sign before you agree to anything in writing.

Shared spaces often incur CAM fees tenants must pay

If you choose to rent an entire facility, such as a whole building or storefront, these fees may not be an issue. Instead, your lease may simply require that you perform all necessary grounds and access maintenance services, such as snow removal and landscaping. When you rent a portion of a space or a building that is part of a larger complex, however, you may have to negotiate CAM fees.

CAM stands for Common Area Maintenance. Your CAM fees pay for upkeep of the building, a security guard if you occupy a single suite in a secure building or the maintenance of grounds, parking lots and other shared spaces. Typically, you either pay a flat rate based on the amount of space you rent or assume a specific percentage of the annual total CAM fees when you sign your lease. Review these fees and the actual bills associated with them carefully, as you may be able to negotiate for reduced responsibility in this area.

Check your liability if you choose to sever the agreement

One major issue that businesses often overlook is the potential penalty associated with ending a commercial lease early. If you continue to grow, you could find yourself in need of a bigger space before your lease term ends. If the opposite happens, and you find yourself facing decreasing revenue, downsizing your space may be critical to keeping your business functioning.

Some commercial leases will hold your business liable for rent and CAM fees until a new tenant moves in. Others may demand rent, even if a new lessee takes over your space. Depending on how popular the facility or area is, that may leave you on the hook for months or even years for rent in a space that no longer suits your needs. Failing to pay that rent, however, could leave you vulnerable to a breach of contract lawsuit.


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