What Ohio Small Businesses Should Know Before Signing A Commercial Lease
A commercial lease may be one of the largest commitments made by an entrepreneurial business. No matter whether you plan to open a shop, restaurant, office, warehouse, or anything else, the provisions of a lease agreement have a considerable influence on the finances and prospects of a company’s development. However, most business people in Ohio enter into such agreements not knowing what they risk.
Commercial leases differ considerably from residential leases. According to Ohio law, it is assumed that both parties to a commercial lease are sophisticated. Therefore, it is crucial for business owners to review lease agreements before signing.
Understanding personal guarantees
Among the many clauses in a commercial lease agreement, the personal guarantee is among the most important. It is a condition that the landlord requires the tenant to give when starting the business, especially in the case of new and unknown businesses.
When there is a personal guarantee in place, the tenant’s personal finances become open for the landlord in case the tenant fails to pay rent and honor the lease terms. There are some business owners who assume that by being an LLC, there would be no liability issues, but when they sign the personal guarantee, all the other forms of protection become redundant.
It is possible to negotiate the guarantee terms before signing.
Watch for hidden costs
Monthly rent is just one piece of the entire financial puzzle. There are other commercial lease costs that will add significantly to your overall expenses. These may include:
- Common Area Maintenance (CAM) charges
- Taxes on the property
- Insurance costs on the building
- Utilities bills
- Maintenance expenses
In some cases, there might be annual rent increases written into the lease agreement. Make sure you know what you’re getting yourself into before signing the lease.
It’s important to understand what kind of lease the agreement is. This will determine how expenses are shared by the tenant and the landlord.
Maintenance and repair responsibilities
Tenants are usually shocked at the extent of maintenance that falls on their shoulders in commercial properties. In some cases, the tenant takes care of all maintenance work from HVAC service to structural repair.
If the contract wording is extensive, it will cost the tenant money for major renovations that may be needed far into the future after they’ve moved out. It’s imperative that business owners know who takes care of maintenance on the property.
Early termination and renewal clauses
Organizations develop, and while one place may suit them now, it does not necessarily mean that the same will apply in the future. Nevertheless, commercial leases can tie an organization down for a period of time during which exiting becomes very difficult.
Termination of the lease is one such clause that could allow an organization to terminate the contract in certain circumstances, although in most cases, there will be either a penalty or even a notice provision. Another important clause in this regard is the renewal clause that specifies whether the tenant has any rights regarding the extension of the rental period.
Talk to a Columbus, OH, Small Business Attorney Today
Kohl & Cook Law Firm, LLC, represents the interests of Columbus businesses as general counsel. Call our Columbus small business lawyers today to schedule an appointment, and we can begin discussing your business’s needs right away.
