The Law Office of Lynnette Ariathurai A Professional Corporation

Understanding commercial real estate terms and agreements

It is crucial that any small business owner considering a contractual agreement understands all terms contained therein before signing anything. Especially with regard to commercial real estate endeavors in California, there are various types of leases and options that may significantly affect on one's short and long-term goals. Therefore, it is advisable to seek clarification of such issues before determining which arrangement best suits one's particular business needs.

Protecting the bottom line is a main priority of most business owners. When considering a commercial real estate project, one will want to clarify the exact amount of expenses that a potential deal carries. An important factor is whether there are any hidden or additional charges for which one will be responsible after signing a contract.

With regard to leases, some landlords offer fixed leases, while others insist on gross lease agreements. The latter allows a landlord to increase a tenant's monthly rate in order to help offset increased expense amounts. There are various reasons why one or the other type of lease may best fit one's specific needs.

In addition to the two types of leases mentioned, a California business person might also want to consider arrangements that include a step lease (with the rent increased by a specified amount annually, designed to cover the landlord's additional carrying charges) or a percentage lease (where a percentage of gross business income is paid as rent). By acting alongside the guidance of an experienced commercial business attorney, one can seek assistance in determining which type of lease best aligns with one's business goals. An attorney can also help protect bottom line interests and preserve one's rights throughout the process of negotiating and executing a real estate agreement.

 

Source: smallbusiness.findlaw.com, "Types of Leases", Accessed on Aug. 1, 2016

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