When you enter into a lease negotiation with a prospective landlord, you want to give him or her the benefit of the doubt. No one wants to think the worst about another person, especially when you're excited about moving into an office and thrilled to have the search for the perfect space over. Unfortunately, commercial leases tend to favor landlords, and there may be some dark secrets lurking in the language of the contract, including, which is why it is important to hire a commercial real estate agent who will have your best interest in mind. Here are some example of what to review in every contract:
1. Load Factor Calculation
To determine the rentable square footage that you'll be required to pay for, landlords use something called the load factor. There is no set equation for arriving at this figure, opening the doors for landlords to increase the square footage used for calculations and charge you more. Make sure to ask your landlord exactly is included in the common areas and double check the math.
2. What's Included in CAM
Common area maintenance fees or CAM are a normal part of a lease, but what's passed along to tenants through those fees can vary wildly. Get a breakdown of exactly what your landlord will and won't include in CAM calculations. Things like salaries, consulting fees, structural repairs, tax penalties and loan interest payments should be the responsibility of the landlord, not your company.
3. Rent Escalation Methods
Landlords hope that you won't take the time to carefully study the way in which your rent increases will be calculated. There are a number of ways that landlords can profit heavily from rent increases, such as choosing a base year where costs were low, adding unfair expenditures to operating expenses or choosing an obscure, highly volatile index to tie the rent to.
4. The Reason for Tax-Related Increases
When taxes increase for a landlord, CAM fees typically do as well. This is fine when the actual taxes your landlord pays have gone up, but you should never be expected to pay for special assessments like the cost of new sewer lines, income taxes, corporate taxes, payroll taxes and other taxes associated with your landlord's business.
5. The Definition of Nonstructural
Leases often say that tenants are free to make any alterations that are nonstructural; however, your and your landlord's definition of what is and isn't structural may not be the same. Simply changing a light fixture could result in a dispute with your landlord, so make sure to have the term 'nonstructural' defined in the contract.
6. You May Not Be Able to Sublet or Assign After All
If your lease requires you to get the permission of the landlord before subletting or assigning, you may find that you are unable to exercise this right in the future. The lease may say that the landlord promises to be 'reasonable’, but this term is so vague that it allows for your request to be rejected for nearly any reason.
7. You May Have to Pay Disputed Fees Up Front
Should you find yourself in a dispute with your landlord over rent or fees, your lease may require you to pay those costs and then sue your landlord. Language like this should be removed from leases whenever possible.
Contact Pacific Coast Commercial to learn more about how we can assist you in your commercial real estate needs. (619) 469-3600
Article by: ReOptimzer
DISCLAIMER: This blog/article has been curated from an alternate source and is designed for informational purposes to highlight the commercial real estate market. It solely represents the opinion of the specific blogger/author and does not necessarily represent the opinion of Pacific Coast Commercial.
All content provided on this blog is for informational purposes only. The owner of this blog makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site. The owner of will not be liable for any errors or omissions in this information nor for the availability of this information. The owner will not be liable for any losses, injuries, or damages from the display or use of this information.
Keywords: San Diego Commercial Real Estate For Sale, Commercial Property In San Diego, Commercial Real Estate In San Diego, San Diego Investment Real Estate, Commercial Property Management In San Diego, San Diego Commercial Property Management, Commercial Property Management San Diego, Managed Commercial Property San Diego, Commercial Property For Sale San Diego, San Diego Commercial Real Estate Leasing, Top Real Estate Agents in San Diego, Commercial Property in San Diego, Property Management Company San Diego, Real Estate Agent in San Diego, San Diego Commercial Real Estate Real Estate Agent