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Understanding Clauses in Commercial Leases

 It is no surprise that there is a big difference between residential and commercial leases. Whenever dealing with a commercial lease, the key parts happen to lie within the clauses in the lease. These clauses need to be thoroughly reviewed and understood.

Commercial Boom in Phoenix

The pandemic sure hasn’t slowed down construction projects or real estate developments in Phoenix. Real estate development attorneys in Phoenix have been working around the clock to ensure all contracts and leases are in place.

Due to the growth in commercial leases in Phoenix, we wanted to take a moment to review some important clauses that commonly appear in commercial leases.

Use of Space

How you plan on using the space for the commercial building needs to be included in a clause in the lease. This is important as some limitations may be set.

If you plan on changing a retail area into a restaurant, you will most likely need permission to do so since there will be lots of renovations to be made.

The lease could have a clause that includes the terms of “exclusive use”, which limits what you can do with the building you are leasing.

All parties need to agree on what the building is being used for and all parties must always discuss any limitations before signing and finalizing any commercial leases.

Renovations

Speaking of renovations, this should also be included in a clause. The landlord is responsible for remodeling the area so that it is ready. But are you allowed to make any changes? It is the owner’s right to set limitations and also expectations. There will be guidelines when renting any commercial space and you must follow them.

This means the owner of the building has the right to limit the renovations you make on the commercial building.

Termination and Subleasing

This is an extremely important clause that needs to be thorough and completely understood.

Unfortunately, if the business fails, you need to know what to do with your commercial lease.

Common questions include:

Can you sublease for the remainder of the lease?

Or can you fully terminate your lease?

The clause in the commercial lease should always go into full detail on if subletting is allowed or what to do to terminate a lease. Always pay close attention to this clause to know your options.

Working with an Attorney

Most leases are open to negotiations and parties should always finalize everything before signing the dotted line. This is why you should talk with an attorney as leases and clauses can be complex.

To ensure you understand your commercial lease, meet with the team at Murphy Cordier PLC. We have the experience and skills to help you properly review all leases, including important clauses.