Before you sign anything, make sure you understand and agree with all the terms of the contract. “There is no such thing as a ‘standard lease’and landlords almost always negotiate,” says Benjamin Miller, who practices business and real estate law in Houston.
Don’t lose sight of the fact that the “standard form lease” represents the landlord’s wish list and, if it’s not appropriately modified, it may not serve your interests when issues arise. A lease is much like any business agreement in that it sets out the parameters of a business relationship. You cannot easily break or change a commercial lease. It is a legally binding contract, and a good deal of money is usually at stake. When everything goes as planned, most any lease will serve the parties well, but the true test occurs when there are hiccups in the relationship. If the lease isn’t drafted carefully, a hiccup can become a major problem without a solution.
There are, in general, three kinds of commercial leases:
- A Gross Lease: the renter pays the landlord a fixed monthly rent. It is then up to the landlord to pay all the expenses of operating the building.
- In a Triple Net Lease, the tenant pays base rent and also part of the building’s operating costs including property taxes, insurance and common area maintenance.
- A Hybrid Lease has features of both gross and triple net leases.
Triple Net Lease costs are shared according to the percentage of the tenant’s square footage to the building’s total square footage. So, Miller advises, “Pay attention to what is included in costs and get the right to audit the landlord’s cost records.”
Common-area maintenance is generally the amount of additional rent charged to the tenant to maintain the common areas of the property shared by all the tenants and from which all tenants benefit. Examples include repairs, cleaning, janitorial and trash services, and personnel costs associated with the property. Most often, this does not include capital improvements to the property, tenant build-out expenses, legal fees, costs for services to other tenants, commissions to brokers, and costs arising from a landlord’s negligence. Consider having your lease contract reviewed by an experienced attorney.
This article was written by Ron Consolino and was published in the Houston Chronicle recently. Mr. Consolino is a business counselor for SCORE, a nonprofit association, whose volunteers help start and improve small businesses. This article is for educational and informational purposes only.
Real Estate transactions can sometime be overwhelming. At Hubbard Law Firm, we offer a wide variety of commercial and residential real estate law counsel. Our office can help facilitate a successful completion of your real estate project or development and help you achieve your real estate goals. If you have questions about a residential or commercial lease please contact our office at 281-358-7035 or visit our website at www.hubbardlawgroup.com.
