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Issues to Consider When Creating Commercial Leases in California

by | Dec 30, 2016 | Real Estate Law

When you are creating a commercial lease on a southern California property, it pays to consider the individuals, groups of individuals or companies that will be considering it once completed. It also pays to remember that the creation of a lease prior to negotiations does not forgo negotiations. Potential complications can arise during the early stages of the negotiation process. The complex nature of the issues involved as well as the number of issues to be negotiated depend upon the specific circumstances surrounding your property, your lease terms, and your potential tenant’s needs for the space. The open nature of the commercial lease negotiation only solidifies the need for an experienced real estate attorney throughout the process. Consider these examples of common issues associated with the southern California commercial lease when deciding whether or not to consult with an attorney for the transaction.

Subleasing: Many tenants will desire the possibility to sublease a building or unit in order to decrease the risks for their business. Including the option to sublease means that if they experience big changes that alter their business’s needs in regards to location, or if major financial changes require they make a change, they can move locations without breaking their lease terms as long as they first find someone to sublease the premises. The option for subleasing can sometimes leave the property owner holding more of the risk for the transaction as they have less control over who is in their building. The new tenant could be financially irresponsible, or unprofessional in their use of the property. With an experienced attorney, negotiations can be completed that provide options that are suitable for both parties.

Operating Expenses: The question of operating expenses and who is responsible for the costs associated with them is often one of the most highly debated portions of a commercial lease during the negotiations. If tenants operate using an entire building or property, the answer isn’t as difficult to find. They simply take over operating expenses. Yet in many instances, the tenant will be one of a number of tenants with shared areas so the amount of operating expenses the tenant is responsible must be very clearly defined in order to avoid disputes down the road. The cost associated with operating expenses can add up quickly and a lack of clear definition on this matter from the outset can lead, at the very least, to disgruntled tenants who feel their transaction negatively affected their company’s bottom line.

Maintenance Responsibility: Another highly negotiated portion of the common southern California commercial lease is maintenance responsibility. Some tenants will want the complete control that holding maintenance responsibility offers, but many see it as another expense that they don’t want added to their plate. When a tenant is responsible for maintenance, this often goes hand in hand with a freedom to make changes or repairs to enhance their customers’ experience. Tenants who do not want maintenance responsibility due to the financial obligation will want to discuss the process for obtaining quick and professional repairs as necessary during their tenancy. It is best to have this resolved prior to attending any negotiation meetings, but to take your option to the table with an open attitude in case the tenant has an alternative they care deeply about. In some cases, their alternative will not be detrimental to the property owner in anyway and agreeing to it can go a long way towards creating a positive landlord/tenant relationship.

Use of Premises: The specific use of the property is usually a focal point in most commercial leases. Property owners may want to avoid specific types of businesses functioning in their building or property. Sometimes the question is whether or not the potential tenant will support and compliment the tenants that are already in place in the property. Sometimes it’s a simple matter of avoiding the conflict of multiple competing companies in the same complex. It’s very important than any limitations in this area are very clear at the very beginning of any negotiations.

For assistance negotiating your own commercial lease, please get in touch with one of the experienced southern California real estate attorneys at The Law Office of the Law Office of Ernesto Aldover.