You’ve found the space and have come to terms with the Landlord. You’re nearly at the finishing gate to getting your business venture off the ground, and BAM! The landlord has presented you with a 30-40 page lease that you must review to finalize the deal. Should you read it or just sign off and get the moving party started?
A commercial real estate lease is the all-encompassing document that sets up your agreement with a landlord to rent a space. It incorporates the material items negotiated at the lease/counter stage along with the specific rights and responsibilities of both parties going forward.
Keep in mind this is a lengthy, legal document and almost certainly favours the landlord more than the tenant. It is in your best interest to put it in front of your lawyer or insurance broker to fully understand what you’re getting into.
This document should be read front to back thoroughly. If you don’t understand a clause or point, you need to ask. That is where a lawyer can be helpful in unwinding the legalese terms within. Agents will often work with lawyers to help arrive at the best way to communicate concerns in the lease back to the landlord to resolve.
In the case of the insurance requirements, an insurance broker can be extremely helpful in explaining that portion of the lease. Landlords will require from $2-5 million in liability incidence insurance as well as glass insurance. These costs are in addition to the building insurance, which is typically covered off in occupancy costs.
What’s up for discussion
While some things in the lease can be discussed and possibly changed, it is not the time or place to negotiate the terms that were previously agreed to. It is very hard to ask at this point in the transaction for free rent or extra parking stalls, for example.
In most Saskatchewan real estate lease negotiations a condition on the offer will be placed for review and acceptance of the lease. It is important, like all other offer conditions, to stay within the timeline provided. It can put a snag in your possession date or completion of landlord’s work (if applicable) if you’re unable to provide the landlord with comments and feedback in the time specified.
Once you’re satisfied that you understand and are able to accept the lease, the landlord or their agent will produce hard copies to execute. Depending on your possession, you can plan to get the utilities turned over to your name (if applicable) and order a copy of your insurance certificate for the landlord. Come possession, with all these items checked off your to-do list, the keys are released and you are a bonafide commercial real estate tenant.
Posted by Kelly Macsymic