Should you hire an attorney to review a commercial lease?

Reading a lease can be a daunting and time consuming process. That being said, it is an important document and you have to spend some time going through the details. I know what you're most likely thinking: I have rented 7 apartments on my own, this first office isn't a whole lot bigger. Why do I need to hire an attorney?

The simple answer comes back to the regulations in residential real estate vs the regulations in commercial real estate. In residential, if your landlord doesn't deal with a maintenance issue, there is a rental board in town that specializes in tenant rights. In commercial real estate, the lease is a formal contract and sets the legal terms moving forward without a ton of regulation.

What this means to you?

I have seen very landlord friendly leases that tenants sign without knowing what they are giving up. Some examples of things to look for:

-Holdover: Landlords don't like companies staying in place long term on a month to month lease. To prevent that, they add a clause called Holdover which sets the rent for month to month terms after your initial lease expires. Landlords typically ask for 150% but it can and should be negotiated.

-Percentage rent: For retail space, landlords will attempt to receive a % of your total sales revenue. I have even seen landlords ask for a % of business sales price if you sell your business during your lease term.

-Restoration Clauses: Most landlords will ask to approve any improvements completed in the space. What a business needs to be careful of is creating a situation where a landlord demands that a space is restored to its past condition.

-Code Compliance: Spaces and improvements need to meet code and code is consistently changing. It is important to make sure that you don't agree to bring a landlords building up to code for improvements you are completing. ADA compliance is very expensive and you do not want to bear the brunt of these costs.

-Personal Guarantees: Landlords will typically ask small office and retail users to guarantee a lease. This are dangerous but sometimes can't be avoided. If you do agree to one, try to have it scale down over time.

These are some issues to watch out for, but there are many others. A real estate attorney can help you drill down to the important issues and make sure that you are signing a fair document. I would have an attorney review the document for 2-3 hours just to make sure you understand your risks.

Good luck and feel free to email support@rofo.com with any specific questions.