Commercial Leases

December 2, 2015

Many businesses enter into lease agreements without professional advice.  The moment you sign a commercial lease agreement, you have most likely made a long term commitment with a variety of obligations and demands – both monetary and otherwise. Many clients I meet do not realize the gravity of the agreement they are entering into. For some, they think of it as a monthly fee, others think they can just get out of it, or leave the premises without legal consequences or implications. However, when I explain the agreement they have just entered into from a high level, their view on the agreement suddenly changes. For example, a client may say, it is a $1500.00 per month commitment, what’s the big deal? It’s the cost of doing business, right? Yes – I suppose that is somewhat true, but in fact, what if it is a $1500 per month commitment over 5 years? That is a $90,000 commitment. Many clients have had experiences in the past when renting an apartment or home – however, leases in the commercial context are much different. Most of the protections afforded to tenants under rental housing legislation do not exist in the commercial context.  In the commercial context, parties are allowed to negotiate the terms of their agreement as they choose. Why Consult a Lawyer? When running a business outside of your home, you probably need to sign a commercial lease in order to rent a space to operate your business, whether to make your product, or to meet your clients and customers. Invariably, commercial leases heavily favour the creator of the lease – the landlord, and are unfortunately worded in complex legalese which, without proper advice, makes it difficult to truly understand and appreciate the obligations you are agreeing to, and the possible legal implications.  Seeking professional advice from a lawyer should be the first step you take when entering into commercial lease negotiations. Many clients I meet have the misconception that a lease is “written in stone” or cannot be changed to suit their needs or particular business. However, many landlords understand the commitment they are receiving from a tenant and thus are willing to make changes and concessions to “close the deal.” Offer to Lease Tenants and landlords typical begin by signing an “offer to lease” which outlays essential leasing terms such as rent, additional rent (maintenance, insurance, realty taxes), the term of the lease, etc. This legally binding agreement comes with the expectation that the offer to lease document will be replaced thereafter by a longer formal lease which will be much more in-depth and will involve a host of obligations and requirements which were not included in the offer to lease. The landlord then provides the tenant with their standard formal lease after the tenant signs the offer to lease. It is safe to assume that your landlord’s formal lease will be heavily structured in the landlord’s favour. Make sure you don’t sign away your right to change the standard form lease when you’re still in the “offer to lease” phase. Getting a lawyer involved right at the beginning stages is essential, as […]

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