Rent, Expenses and Term – Fundamental Components of Commercial Leases

          When entering into a new commercial lease, it is essential that you engage a commercial lease attorney to assist you in reviewing and negotiating the important terms.  This blog article will highlight the most fundamental lease component base rent, expenses that are often passed on to the tenant, and the term of the lease. 

          The most common factor in evaluating the cost of a commercial lease in Massachusetts is the base rent, which is most commonly assessed base on square footage of the rental property.  One should also pay attention to any adjustments in rent per annum.  Once a business owner determines an acceptable rent amount, he/she should consider the rent adjustments and additional expenses that will be associated with renting the space.

          The most common type of commercial lease is the triple net (NNN) lease that will shift the financial burden of property taxes, insurance and common area maintenance (CAMS) and/or operating costs to the commercial tenant. However, triple net leases can also contain additional provisions that expand the scope of tenant financial liability on the leases.  In some cases, commercial landlords may shift the entire burden of property maintenance, repairs, upgrades, and upkeep on the commercial tenant.  This means that the tenant will be responsible for cleaning, snow removal, landscaping, repairs to mechanical systems, and other common every day repairs.  Here, liability may fall on the tenant for the entire building and land, or just a portion thereof, or solely the interior of the property.  In many instances of shared commercial space, commercial landlords will charge the tenant operating costs or CAMS, and maintenance and repairs will be included in the lease.  In this case the tenant will pay its pro rata share of the common expenses, and will not have to bear the entire burden of such expenses.      

           When entering into a new commercial lease, one of the most important features to consider (other than the price) is the term of the commercial lease. In this case, it is important that you consult a Boston area commercial lease attorney to help you with the various issues and considerations that can arise when evaluating a lease term.  In many cases, commercial landlords will offer better rent terms with a longer term of tenancy.  However, this is not a general rule, and a business owner should consider their medium and long term goals for growth prior to committing to a location.  Commercial leases are excessively difficult to avoid for tenants in Massachusetts without significant financial penalty or litigation, so it is best to determine whether the needs and plans for the business align with the term of the proposed tenancy. Additionally, a prospective tenant should conduct significant due diligence prior to entering into a long term lease, including a inspections of the physical condition of the building, assessment of traffic and parking, review of local bylaws, regulations and permit/license requirements, and a review of the surrounding area for its character, propensity for crime, ongoing development, and other features of the area.

            If you are a business owners in Eastern Massachusetts who requires assistance from a commercial real estate attorney that is experienced in drafting, reviewing, negotiation and consulting with clients on commercial leases, you may contact the Law Office of Stefan Cencarik for your leasing needs.  Our commercial lease attorneys are able to help guide you through this process and we can leverage our network of professionals to assist you in evaluating your next business location.