When signing a commercial lease, it’s easy to overlook the fine print in the excitement of securing a new space for your business. However, certain provisions in your lease can pose significant risks to your business. As a Senior Associate at Transcendent Law Group, I’ve seen how these clauses can wreak havoc on unsuspecting tenants. Here are three critical lease provisions to watch out for and what you can do to protect yourself.

Landlord-friendly Termination Clauses

One of the most dangerous trends in commercial leases today is the inclusion of landlord-friendly termination clauses. These clauses often prevent tenants from canceling their lease early under any circumstances. Worse yet, they can obligate tenants to pay years’ worth of rent for a space they are no longer occupying. To safeguard your business, it’s essential to negotiate these clauses before signing. Ensure there are reasonable conditions under which you can terminate the lease, such as severe breaches by the landlord or substantial changes in your business circumstances.

One Way Indemnity

Typically, commercial tenants are expected to cover a landlord’s costs for damages they cause. However, many leases fail to offer reciprocal protection for tenants against a landlord’s negligence or failures. This means that while you might be liable for any damage you cause, the landlord may not be responsible for ensuring the property is safe and functional for your use. To mitigate this risk, negotiate for a mutual indemnity clause that holds the landlord accountable for their obligations, and ensures you are protected against their negligence.

No Opportunity to Cure

Commercial leases should clearly outline the procedures for addressing failures to perform obligations by either party. Without explicit language detailing what happens when the landlord fails to maintain the property adequately, tenants can find themselves with little recourse. Combine this with a no-termination clause, and you could be trapped in a lease for a property that is uninhabitable or unsuitable for your business needs. To prevent this scenario, ensure your lease includes clear provisions that allow you to remedy or “cure” issues caused by the landlord’s neglect and, if necessary, terminate the lease without severe penalties.

What can you do?

Always have a business attorney review your lease before you sign. Remember that this is a negotiation, and you can always take your business elsewhere if you aren’t getting the terms you are looking for. Here are three specific tips:

  • Ask your attorney to draft liability limitation language. This can provide critical protection to keep any damages you might owe to an amount your business/insurance can handle
  • Have the right insurance. Ask your carrier what protections are in place to help shield your business from liabilities that may arise from the use of the leased premises.
  • Be prepared, not surprised. Ask your business attorney to help you develop some best practices for how the lease governs your interaction with the landlord. For example, you can have a short written process for how you report issues to the landlord, ensuring a paper trail that will protect your business rights.

Understanding and negotiating the terms of your commercial lease is crucial to protecting your business from potentially devastating clauses. Don’t let unfavorable lease terms put your business in jeopardy. Contact us today! We can help you take the necessary steps to safeguard your business.