California commercial leases are often longer, more detailed and more complex than residential leases. On top of that, the statutory protections available for residential tenants generally don’t apply to commercial tenants.
If you are considering entering into a commercial lease, proper due diligence and a thorough read of every page of the lease can help you spot potential red flags before you sign and commit.
According to CBI Commercial, a well-known commercial brokerage in California, there are particular red flags lessees should take note of.
Missing elements
If you and the lessor discussed a specific or unique component to the agreement that you do not find anywhere in the commercial lease agreement when reviewed, consider discussing a revision. If this is something material to your contract, do not sign any paperwork until the issue is resolved.
Lengthy renewal clauses
Be wary of a commercial lease that obligates you as a lessee for what might be considered an unreasonable amount of time. If your lease includes a clause outlining an expiration period that extends past two years, you may want to reconsider. If the property is ideal, consider negotiating the duration with the lessor. It is generally better for a tenant to have a shorter term lease, but with options to extend the term.
Vagueness
A well-written commercial lease agreement leaves nothing open to interpretation. Vagueness or unspecific language often paves the way for disputes among parties and potentially costly courtroom battles. Reviewing your commercial lease carefully is critical. Go a step further and get the advice of a legal expert with knowledge in this area. A lawyer with a background in real estate law can spot areas that you may have overlooked and provide additional guidance on next steps.
