Understanding the Commercial Lease Agreement in Washington DC
Are you thinking of expanding your business to meet the huge demand from your online and offline orders? Perhaps you should get a bigger space, or open a new branch within or out of the city. And if these are your options, then you need to understand leases. The commercial lease agreement in Washington DC (District of Columbia) is legally binding, and after you sign it, you cannot go back on your word without parting with some money. This document has the set of default rights and obligations of the lessor and the lessee of the commercial property. Though it generally set out to be fair, a standard Washington DC commercial lease agreement may favor the landlord. If you don’t review the lease, you may easily end up paying more than you should, creating an environment that is unfavorable for the growth of your business.
Understanding the elements of a commercial lease agreement in the District of Columbia is also important because the commercial property lease agreements or the business lease agreements are different from the residential leases. Residential leases get more consumer protection than the commercial leases because the lawmakers assume that the parties to commercial contracts are more knowledgeable, and the can hire the big guns to protect their interests. On the upside, the commercial leases can be negotiated.
So, which are the essential and negotiable elements of the commercial lease?
Your lease may be fixed term or periodic. With a fixed term lease, the lease termination date is known from the lease commencement date. The terms of the lease do not change during the length of the lease except when provided for in the lease. The rent will also remain unchanged unless it's provided for in the lease.
The periodic lease, on the other hand, lacks a lease termination date but either party can terminate the lease by issuing a lease termination notice. The advantage of this lease is that it may be renewed periodically.
Also under lease terms are short-term and long-term leases. Whether you choose the short-term or the long-term lease is a matter of necessity. A short-term lease is necessary for a small business or a startup because of uncertainties. You may not have many concessions with the short-term lease but, it’s cheaper than breaking a long-term lease. To make a short-term lease work, you may negotiate with the landlord to have the option to renew that lease. The long-term lease, on the other hand, works well with established businesses, and you may negotiate fair concessions like tenant improvement allowance or free rent periods.
Like all other states, the rent payable for commercial spaces in the District of Columbia will differ depending on the type of lease selected.
The gross lease is the kind of lease that lets tenants pays a fixed rental charge, often the base rent only.
Net leases allow tenants to pay the base rent in addition to most or all the commercial property expenses. The main expenses are CAM, property taxes, and the insurance premiums. The triple net lease, a lease preferred by most landlords create a situation where the landlord pays the base rent and these three expenses.
Modified Gross lease: this is a hybrid of the gross and the net lease. It a fair deal that lets a tenant pay the base rent and only a portion of the net property expenses.
Percentage lease: with this lease, a tenant pays the base rent in addition to a percentage of their gross income.
Permitted uses of the property
Do not sign the commercial lease before you confirm that the landlord permits running of that line of business. Check all the specific uses of the property according to the city’s zoning as well as the needs of the landlord. If your unique business idea can promote the property, negotiate with the landlord.
Specifications of the space
The lease will come with a section for the specifications or the description of the property. Don’t take the realtor’s word for it. You need to confirm the dimensions of the space to ensure that it is right for your business.
Even though the amount charged in security deposit for commercial property in DC is not specific, you should negotiate a fairer deal and also ensure that the refund terms are fair.
Often an area of contention. Ask if the landlord offers an allowance for tenant improvement. If you are taking a long-term lease, you will easily negotiate a higher allowance.
Other elements to review:
ADA compliance: make sure that the lease names the party responsible for improvements necessary for ADA compliance. The terms should be fair.
Subleases and assignment: can you sublease the property and assign all the leasehold rights to a third party?
Are you looking for help with business leases in the Washington District of Columbia? Get started with our easily downloadable and free commercial lease agreement forms today.