Retail Business Lease Agreements
A retail lease agreement is quite different from a residential lease agreement. One of the most important differences is that state landlord-tenant law does not provide as many protections for commercial tenants as it does for residential tenants, because the law expects merchants to be relatively knowledgeable and therefore better able to protect themselves from overreaching by the landlord.
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Payments
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The lease should state the amount of the security deposit and the conditions for its release at the end of the lease term. Ideally, the deposit should be in escrow so that the landlord cannot arbitrarily retain it. The lease should also state the amount of the rental fee. Many retail leases contain provisions allowing the landlord to raise the rent during the term of the lease as long as he provides notice. This is particularly common in retail leases because retail property, such as a new shopping mall, can appreciate in value quickly.
Duration
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Retail landlords typically seek long lease terms. If your business is new, however, it might be in your interest to seek a shorter lease term until your business is established. If it fails, you will still be bound for the remaining term of the lease. If it thrives, you may want to move into a bigger shop but find yourself unable to break your lease without significant expense.
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Alterations
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Retail shop owners often need to significantly alter the rented premises. You may need to redecorate, install signage or build a parking lot. Unless your lease terms allow you to do this, you can face civil liability for such alternations even if your alterations increase the market value of the property. Make sure your lease is specific about what alterations you are permitted to make. Your landlord will probably insist that you bear the expenses for returning the property to its original condition by the time the lease expires.
Types of Leases
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Different types of retail leases are common. Since you will probably be making money from the property you are renting, your landlord may want you to pay some of the rent with a proportion of your business income, an arrangement known as a percentage lease. Consult a lawyer before you agree to a percentage lease, because this may create a legal partnership between you and your landlord. Alternatively, your landlord may seek a gross lease, in which you not only pay rent but also cover a proportion of the landlord's property taxes, insurance and maintenance costs.
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References
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