How Small Businesses Can Prepare Legally Before Signing Commercial Leases In Ohio
Signing a commercial lease may be one of the most important and costly decisions a small business owner can make. Whether a business owner is looking to open their first storefront, expand their office space, or move their business to a new location, a commercial lease can bind them to a number of financial and legal obligations for years to come. However, many business owners enter into a commercial lease without being fully aware of the risks that may await them in the small print of the contract.
Commercial leases are not one-size-fits-all
Unlike residential leases, commercial leases in Ohio tend to be negotiable. Leases tend to favor the interests of the landlord. Landlords anticipate that a business owner will simply accept standard terms without question. Lease provisions, including rent increases, maintenance, renewal options, and early termination, can have a major impact on a business. What appears to be a relatively inexpensive lease today can become expensive later due to rent increases or maintenance fees.
Understand what you’re truly responsible for
One of the biggest surprises for small businesses is often the cost of maintenance and repairs. Many commercial leases make the tenant responsible for the cost of heating, air conditioning, plumbing, roof repairs, and even structural repairs. The cost of these repairs can add up. It is important for the business owner to understand the responsibility for repairs before entering into a lease.
Watch for personal guarantees
Personal guarantees are also common, particularly among small businesses or newly formed businesses. A personal guarantee means that the personal assets of the business owner are at risk if the least agreement is breached. Although guarantees are necessary in some cases, they are also negotiable. Limited guarantees, time-based guarantees, or release provisions based on a solid payment history are examples.
Zoning and permitted use matter more than you think
The “permitted use” provision of a lease can specify the uses allowed on the site. If the wording of this provision is too narrow, it might prohibit growth and adaptation later on. Furthermore, the zoning regulations must fit with the intended use of the space. Leasing without verifying whether the space meets the zoning requirements might mean delays, penalties, and/or inability to operate in the space at all.
Plan for the future, not just the opening day
A smart lease plan will take into account growth opportunities, exit strategies, and market shifts. Renewal options, subleasing rights, and assignment clauses will allow for growth opportunities, downsizing, and/or selling the business. If the business owner hasn’t planned ahead in this manner, they might be stuck in a location that no longer suits their needs or worse, unable to get out of the lease without incurring huge penalties.
Talk to a Columbus, Ohio, General Counsel Lawyer Today
Kohl & Cook Law Firm, LLC, represents the interests of businesses in contractual dealings with landlords. Call our Columbus general counsel lawyer today to schedule an appointment, and we can begin reviewing your lease right away.
