Important Lease Provisions

May 03, 2016

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Lease issues can be a big problem if they have not been addressed when the lease is signed. Here are some examples of typical issues:

  • You are in the process of selling your business and need to assign the lease to the buyer.
  • The air conditioning unit breaks down shortly after you move into the lease space.
  • Business sales are hampered because there is inadequate parking for your customers.
  • Your business is growing and you need a bank loan.  The bank requires a first lien position but your landlord has a security interest covering your business assets.
  • You want to put up a sign for your business.
Be sure you understand the following:

Location. Where is the space located?  Does the space accommodate your customers?  Does it fit your business’s culture?

Space. What exactly are you renting?  How is the space measured?  Does your space include common area?

RentHow much is the rent?  How is it calculated?  How are rent increases handled?  How much is the security deposit and when will it be returned?  

Other Costs. What additional costs do you need to pay, such as insurance, property taxes, maintenance, utilities and common area costs?

Term. What is the lease term?  When does the lease start and end?  Can you renew the lease?  Will you have the option to expand your space?  Can you terminate the lease?

Operating Hours. Are there requirements that your business is open certain days and for certain times?

Improvements. Will you need to make modifications to the physical space?  If so will you be able to make these changes?  What are the build out requirements and specifications?  What fixtures do you need?  Who pays for these items and who owns them after the lease ends?

Signs. What are the specifications for any signs?  Where can you put signs?  

Parking. Is there adequate parking for your business?  Are there designated spaces?

Repairs and Maintenance. Who is responsible for maintain and repairing the premises, including the heating and air conditioning systems?  Are there any manufacture’s warranties that will be passed on to you?  How old is the equipment?

Right to Quiet Enjoyment. What happens if there are issues with odors, noises or other reasons why your quiet enjoyment of the premises is disrupted?

Assignment and Subleases. Can you assign or sublease to another tenant?  Will changes in your business entity ownership trigger an assignment?  If you sell your business, what are the fees for transferring the lease to the buyer?  If you are selling your business and these provisions are not spelled out, the landlord may seize this opportunity to renegotiate rent with your buyer.

Termination. How can the lease be terminated?  What are the notice requirements?  Are there penalties for early termination?

Landlord Subordinate Security Interest. Normally landlords require you grant them a security interest in your business’s assets to ensure payment of rent.  Will the landlord subordinate these rights in the event you need to get financing?

Insurance. What types and amounts of insurance are you required to carry?

Exclusive Use. Does the lease prohibit the landlord from renting space in the same complex to your competitors?

Personal Guarantees. Many commercial leases require the business owners be personally liable for the tenant’s obligations.

For more information, please contact Kathy Tremmel at Tremmel Law, PLLC at (512) 539-0317 or kathy@tremmellaw.com.

Topics: Legal

Kathy Tremmel

Tremmel Law

Kathy Tremmel has significant experience both as a business attorney and corporate executive. Her career spans both legal practice and business management and she opened her own solo law practice in January 2010. In additional to running her own practice, she also is of Counsel with Selman, Munser & Lerner, which is a business transaction law firm in Austin, Texas. Ms. Tremmel has more than 10 years’ experience as a business attorney, providing transactional legal services to a diverse client base, from start-up ventures to well established companies. She helps companies with all their contracts, including customer agreements, non-compete agreements, employment agreements, buy-sell agreements, loans, and leases, helps people set up new businesses, and represents buyers and sellers of businesses. In addition, Ms. Tremmel has 10 years of management experience working with start-up companies. As VP of Operations at Tusker Group, an international litigation support company, Ms. Tremmel led international teams, managed production and quality issues, handled price negotiations, worked closely with clients to determine the scope of their projects, provided project management services, and developed, implemented and documented best practices for processing and training. Ms. Tremmel earned a Doctor of Jurisprudence from the University of Colorado School of Law and a Bachelor of Arts from Dartmouth College. She is a Texas licensed attorney and a certified Project Management Professional.
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