4 Things a Tenant Should Add to a Commercial Lease
If you are a new commercial tenant and ask me to review the lease given to you by your landlord, the most important reason you are hiring me is not for what’s already in the lease.
For the vast majority of our clients, the things in a lease that raise a red flag to you are the same things that are going to raise a red flag to me.
More important is what’s not in the lease. Time and again, I see the same things left out of the landlord’s first lease draft — things that almost every landlord will automatically add if simply asked. Here are four of them:
Entry by landlord
Almost every lease allows the landlord to enter the leased premises, but most are silent on providing notice to the tenant before entry. There are very legitimate reasons your landlord may need to enter the space — such as letting in an appraiser if the mortgage is being refinanced, or to access common utilities. But if your business involves confidential information (such as a medical or legal practice), it’s important to make clear in the lease the landlord cannot enter your space without reasonable prior notice.
A landlord always wants the tenant to indemnify it for costs and expenses related to negligent acts of the tenant, which is rarely objectionable to the tenant. But it is often not a mutual provision in the first draft of the lease, and the tenant should have the same protection. If your landlord acts negligently, you should not be liable for its actions.
Landlord’s liability insurance
Commercial leases often go to great lengths to explain all the intricate details of what insurance a tenant must carry, but will then be silent on the landlord’s insurance requirements. If your landlord is not passing the requirement on to you, the lease should make clear the landlord will carry adequate coverage against destruction of the building and liability insurance for the common areas.
Common area maintenance exclusions
When a commercial lease includes a common area maintenance charge in addition to base rent, there often are questions from the tenant on how the charges are calculated by the landlord and what exactly is included in the bill. It can short-circuit disputes down the road when the lease includes a specific list of items the landlord will never include as part of the CAM charge, such as the landlord passing on costs to all tenants in a building for something caused by only one of the tenants or passing on employee expenses for work related to a different one of the landlord’s properties.
This article originally appeared on the Grand Rapids Business Journal’s Law Blog.