Commercial Rental Rights
Businesses of all types make significant investments in the property in which they operate, even if they are leasing the premises. Consequently, people and businesses that lease commercial property are entitled to certain specific protections under commercial rental rights established by law and the terms and conditions of lease agreements.
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Types
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Commercial lease agreements are organized into five different categories: leases for offices; retail space leases; commercial leases for warehouses; those designed for the ground upon which a building project is undertaken; and, finally, what is known as a mixed-use commercial lease, for example, a building that will contain offices and retail space. Despite certain differences in commercial leases, basic commercial rental rights are similar in all agreements.
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Base Lease Term
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One of the primary rights enjoyed by a renter of commercial property is what is known as the base lease term. Because of the investment a typical commercial renter makes in leased premises in order to do business, a guaranteed base lease term that cannot be adjusted is fundamental. In the case of commercial rental agreements, the typical base lease term runs from three to five years for office and warehouse leases. For retail spaces, including restaurants, which require a great deal of specialized improvements, the lease term may extend as long as 25 years.
Modification to Premises
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One of the most important commercial rental rights that should be included in lease agreements is to undertake premise modifications. In residential landlord-and-tenant law, a renter is not allowed to make any significant modifications to the premises. Indeed, most residential tenants cannot even paint a room without express permission from the landlord.
In the case of commercial tenancy, there should be a presumption in favor of the tenant that certain modifications (and in many cases significant ones) may be made to the leased property. Recognizing the prevalent need for renovations to commercial property, the lease agreement should give the business tenant the right to undertake modifications without approval from the landlord.
Option to Renew
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Many commercial lease agreements bestow upon a tenant a provision permitting the automatic renewal of the lease. Armed with this right, a tenant can count on being allowed to remain in the premises indefinitely if she so desires. Thus, the tenant can make appropriate and necessary alterations to the property without fear that it will be a short-term investment.
The right to renew is such that the landlord must honor the tenant's decision to carry the lease forward into another term (within the parameters set forth in the rental agreement). The only exception is if the tenant violates a major lease term, in which case the landlord may evict the tenant or rescind an otherwise required renewal of the rental agreement.
Warning
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Commercial lease agreements are some of the most complex contracts in the business world. Even highly experienced businesspeople are sometimes unable to fully comprehend the rights and obligations associated with these agreements. A business owner facing the prospect of entering into a commercial lease agreement is best served by retaining the services of a commercial real estate attorney. A listing of attorneys that practice in this area is available from the local or state bar association.
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- Photo Credit Image by Flickr.com, courtesy of Ivan Rumata Cabrera Escalante
