1. What Space Are You Leasing?
The lease should clearly define the space, also known as the “demised premises.” This should include a street address and a site plan. Make sure the demised premises described in the lease matches the demised premises you are expecting to receive.
2. Is This a Gross Lease or a Net Lease?
Most leases are gross leases or triple net leases. A gross lease means that the tenant pays the landlord one sum and the landlord is responsible for payment of real estate taxes, insurance, and maintenance expenses. In a triple net lease, the tenant pays a set rental amount to the landlord, but also pays a share of the landlord’s real estate taxes, insurance, maintenance expenses, and building utilities.
3. What Can You Do in Your Demised Premises?
Office leases state that the space will be used for general office. Retail spaces often get more specific. Further, you need to know whether your lease includes an “exclusive,” which is a provision that gives you the exclusive right to operate your type of business in the building or shopping center.
4. When It Breaks, Who Fixes It?
A commercial lease should clearly define who is responsible for repairs of the demised premises, the building, the parking lot and the core building systems (plumbing, electric, HVAC, etc.). Keep in mind that the question here is not who pays for the repairs, but who is responsible for making sure the repairs are made in the first place. Commercial tenants often maintain the demised premises and any core building systems to the extent they are located within the demised premises, while the landlord maintains everything else.
5. How Is My Rental Rate Determined?
Generally, this is done through a rental chart which states the annual rental rate for each year of the lease and what the tenant’s equal monthly payments will be based on the corresponding annual rate. In most leases, the annual rental rate increases from year to year either by a flat amount (say, 2.5 percent) or by reference to an exterior formula. In some retail leases, the tenant is responsible for paying the annual rental amount plus a percentage of the tenant’s sales for the year, which is known as percentage rent.
6. Will There Be a Build-Out And, if So, Who Pays for It?
Commercial space tends to be rather generic and may require modifications, or a “build-out,” for use by a particular tenant. When the landlord pays for the improvements, the amount spent by the landlord is called an “allowance.” If improvements are contemplated, the lease must clearly state what improvements will be made, who will complete the improvements, when the improvements will be complete, and the amount of any allowance.
7. What Is Included in Your CAM?
A triple net commercial lease should state the amount, if any, the tenant must contribute toward “common area maintenance” expenses, or CAM. Often, CAM includes costs of snow removal, security, parking attendants, building maintenance, building management fees, etc.
Be sure to ask these questions before leasing office space to ensure that you’re as informed as possible when making the decision about where to house your business.
Read Matthew Faustman’s comments on, “7 Questions to Consider before Leasing Office Space” on Quora.