There a myriad of provisions that may be and, in some circumstances, must be written into a commercial lease that can be to the benefit or detriment of either the landlord or the tenant. The terms of a commercial lease enumerate the rights and obligations of the parties, rendering it particularly important that everyone involved is aware how to effectively negotiate his or her position to ensure a fair and reasonable agreement is reached.
Determine What Lease Provisions Will Best Benefit The Business
Perhaps the two most significant terms to be negotiated in any commercial lease are the amount of rent and the term of the rental agreement. Most commercial leases will run anywhere from 1-5 years, however, from a tenant’s perspective, the shorter the lease the better, especially if the agreement contains an option provision. A shorter lease provides flexibility by allowing a company to move at the expiration of the current lease term while a longer lease will leave business that has outgrown its current location beholden to the landlord for an extended period of time.
The most important issue to consider when negotiating a commercial lease is the amount of rent to be paid. The potential lessee must consider how much rent the company can afford now and in the future. Keeping this consideration in mind, the lessee should negotiate a limit on the amount the landlord is permitted to increase the rent. Rent increases are usually based either on a fixed percentage of the previous year’s rent or the Consumer Price Index (“CPI”).
Determine Responsibility Of Maintenance And Repairs
As this blog has discussed before, Illinois state law and the Chicago Residential Landlord Tenant Ordinance (“RLTO”), place the responsibility of performing repairs and maintenance in residential leases on the landlord. Commercial leases, on the other hand, usually assign these obligations to either the landlord or the tenant. Often, commercial leases specify that the tenant bears the responsible of maintaining the premises or only certain items, such as plumbing and HVAC.
Establish Unambiguous Default Terms
No business owner signs a commercial lease intending on defaulting on his or her obligations thereunder, however, it is inevitable that many companies are going to fail and will not be able to satisfy their professional obligations. Because most companies can be expected to fall on hard times, it is important that the provisions of any commercial lease clearly establish what qualifies as a default and actions the other party can take in the event of a such a breach.
For example, how long is the tenant permitted to go without paying rent before the landlord can institute an eviction action? If the landlord does commence the eviction process, does the tenant have the right to cure the default?
Because the negotiation and preparation of a commercial lease in can be remarkably complex, it is advisable to consult with an experienced real estate attorney before and during the negotiation process. If you have questions about commercial leasing in Illinois, contact the experienced real estate attorneys at The Slater Firm, Ltd. today.