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Factors to Consider Before Signing a Commercial Lease Agreement in Florida
Getting a commercial lease costs less than buying that prime or small office space. It offers flexibility, and it lets you open shop at a location that attracts the right amount of traffic required in your line of business. Also, the rates charged by lessors are not carved on stone, and you can negotiate for favorable rates.
But, getting a fair commercial lease is not just about getting started today. Think about the future of your business and the rate of growth. Thinking ahead helps you negotiate for favorable terms. The terms of the lease will either make or break your business. A short-term lease is expensive because the terms may change too fast; often, this means an increase in rent or increase in operational costs. For these reasons, you should not rush into signing the lease.
Keep in mind that a commercial lease agreement in Florida is legally binding once signed by the lessor (landlord) and the lessee (tenant).
Which factors should you consider before signing the business lease agreement?
The length of the lease
After you identify the location of the place you’d like to set up shop, complete the rental application for the commercial property. You’ll also apply for a commercial property lease after which the interested lessors will send in their lease agreement forms. Regardless of your excitement, you should not overlook the terms of the lease. If yours is a small business, renewable 1 or 2 year leases are fine, but if your business is already established and location-dependent, you must look for longer lease terms. Keep in mind that you may enjoy a free rent stay the first few weeks or months as you get started, or you may pay less in the beginning.
Speaking of the length of the lease, there are fixed end-date and fixed month/weeks/ years leases. These former has a predetermined end date that signifies the end of tenancy while the latter indicates that the lease will expire after a specific number of weeks, months or years.
There’s also a periodic lease which renews automatically at the end of a lease duration, and either party can terminate the lease.
You should be aware of the options to renew the lease. If the renewal means an increase in the rent after one or three years, then it may not be a suitable space.
Double check that you can use the business premise for the business you have in mind. Some landlords restrict the use of their spaces especially when the activities proposed will interfere with the plans of the building or affect current and future growth of the premise. In other cases, the restrictions are too tight making it difficult to transfer the lease to someone else.
Rent and Fees/ Expenses
Most lessors charge base rent that only covers the space and top that with operating expenses. Before you negotiate the rates, ask your prospective neighbors how much they pay for their spaces then confirm if you will get fair rates. Question rates that are above average.
A Florida commercial lease agreement requires you to choose one type of lease that affects how much you pay. That brings us to:
Gross lease – a lease where the tenant pays a fixed rent often inclusive of some operating expenses.
Net lease – where the tenant pays the base rent and the operating expenses for the premises. Often the tenant pays the expenses pro rata meaning that the tenant pays the property taxes, insurance, and the common area maintenance (CAM) costs. This arrangement results in a triple net lease. You may have a single net lease when you pay rent, and one operational cost; for example, the property taxes or the double net lease where you pay the base rent with the property taxes and the insurance.
Modified gross lease – is a type of lease where on top of the base rent, the tenant shares in the operating expenses with the landlord.
Percentage lease – represents a type of lease common with retail businesses. The tenant pays the landlord a percentage of their gross income in addition to the base rent.
Repairs and maintenance
Things will go wrong in the leased space, and someone will be accountable for the damage. Who will take care of that mishap or the effects of wear or tear? Since repairs are expensive and they may affect your finances, you must know who shoulders the responsibility.
What are the terms and conditions for putting up signage? Can you put signage in front of your store or not, and how much money will you need to pay?
Will your direct competitors be allowed to set up shop in the adjoining office space? Read the terms of your commercial property lease for signing details when you have competitors.
Changes and improvements
Can you make changes to the office space? What happens when you move out? Who pays for improvement of the building or the office space?
Now that you have taken these factors into consideration ensure that you both sign the contract and input your names and addresses. You also need to take the document to the notary public for notarization.
Whether you are looking at an office space in Miami, Jacksonville, Orlando, Tampa, Naples, Fort Lauderdale, Destin or any other city in Florida, you can finally download our free commercial lease agreement forms in seconds.