1) Rent - When does it commence; what is the base rent; will there be percentage rent. 

 

2) CAM charges - Consider a cap on charges and exclusions from items included in CAM charges.  Most commercial retail leases are triple net leases. What this means is that the landlord passes through all expenses to the tenants on a pro-rata basis. These expenses typically include taxes and common area maintenance charges (known as CAM charges). CAM charges in a commercial lease are typically added on to base rent as additional rent. A landlord typically will try to pass through as much of the overhead as possible through CAM charges. It is common to find administrative and maintenance fees, costs for repair and replacement of roofs, lighting, plumbing, electrical wiring, HVAC, etc., for the common areas. How can a prospective tenant minimize the CAM charges?  A prospective tenant can attempt to negotiate a cap on CAM increases yearly, a fixed fee of CAM charges (typically the cap and fixed fee will exclude snow removal in northern climates), exclusions to items that the landlord may pass through to the tenant (for example, exclude costs due to the landlord's or another tenant's negligence), among others. It is also recommended that a tenant have the right to examine the books and records of the landlord to determine if the CAM charges have been properly calculated.

 

3) Personal Guarantee - is a personal guarantee required, if so, can it be limited in time or amount. 

 

4) Term - When does the lease commence - does it commence when the lease is signed, when the keys are turned over to the tenant, when the tenant opens for business or some time after that. 

 

5) Assignment & Subletting - What are tenant's rights to assign or sublet the premises, what are Landlord's requirements prior to consent for assignment or subletting, if a franchise, what are the franchisor's requirements upon a default by tenant, will the tenant and guarantor be released upon assignment. 

 

6) Use - Critical to the functioning of the business, is the use clause broad enough to cover everything that a tenant intends to do at the premises both currently and in the future, does the use conflict with any other tenant's exclusive use rights, can tenant obtain an exclusive right to its use. 

 

7) Signs - Will tenant's sign requirements be approved by the Landlord, will the sign be approved by the local governmental authority, what happens if it isn't. 

 

8) Permits - What are tenant's options if tenant is unable to obtain the necessary governmental permits in a certain reasonable period of time. 

 

9) Default - will tenant be given appropriate notice of a default and an ample opportunity to remedy that default, will the notice and opportunity to remedy a default be different for monetary default versus non-monetary default, what if the non-monetary default cannot be cured in that timeframe. 

 

10) Remedies - what are Landlord's rights on the occurrence of a default, how can tenant soften some of those remedies, is a personal guaranty required, can it be limited. 

 

These are just 10 of the many issues that a commercial lease tenant will face when entering into a lease for the business.

 

Source: Nancy Lanard, Senior Partner, Lanard and Associates, Plymouth Meeting, PA.

 

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