Real Estate and Equipment Leasing: Navigating the Complexities of Commercial Property Agreements (2024)

07 Apr

The California Commercial Lease Agreement (Form CL) is a binding contract between a landlord and a business tenant renting space for non-residential use. It will outline the terms and conditions of a lease, including rent payment, security deposit, length of lease, and penalties for breach of contract.

Many specific restrictions, stipulations, and features of a lease will be negotiated before and during the actual signing process. Navigating the commercial lease process can be daunting but does not have to be overly intimidating for people who invest the proper resources.

Understanding Commercial Property Needs

A business owner or company should identify their needs before seeking commercial real estate, as there are likely to be several options offering various kinds of vacant spaces for people to enjoy all kinds of amenities. People are going to need to consider several business aspects in determining their needs, with common issues often including:

• Budget — The most critical factor in any commercial real estate search is always going to be the overall cost of a lease. You should always examine the cost per square foot of a property, which is one of the more common metrics for commercial real estate leases, to determine how a lease is actually going to cost.

• Property Type and Zoning — The space that is available is going to need to fit your business needs, which could be unique in some cases. If a business has some kind of specific service requirement, it may need to examine local zoning codes to further learn about possible regulations and restrictions in the city.

• Location — The type of business a person is operating will play a major role in where the business will be located. Businesses that are going to be relying on people entering their premises will want to be located in a commercial district that will improve their visibility, while a business that is seeking more of a warehouse function can feel free to operate more outside of city limits.

• Accessibility — Similar to location, a company will want to make sure that its business is easily accessible for any person visiting on foot. There can also be important concerns to address relating to employee access and daily commutes, as well as parking.

• Employee Perks — The best commercial office spaces offer as much as 300 square feet of space per employee. When startups grow at a rapid pace, the employees can often be squeezed into tighter spaces. Employee-friendly businesses often want to offer bonuses such as gyms, cafeterias, and other kinds of shared communal areas.

Types of Commercial Leases

Commercial leases do not come in a single format, as there are actually three primary kinds of commercial leases that each have unique sets of advantages and drawbacks. The type of lease a person signs often depends on their financial situation and personal goals.

The three kinds of commercial leases include:

• Gross Lease — A landlord is responsible for paying all property expenses with a gross lease, also known as an “all-inclusive” lease. Typically, a landlord pays taxes, insurance, and maintenance costs of a property, while a tenant only pays rent. Gross leases are most beneficial for tenants who understand their monthly income and expenses because they will not have to worry about unexpected costs or repairs.

• Triple Net Lease (NNN) — In addition to rent, an NNN lease requires a tenant to pay for the three “nets,” which usually include property taxes, insurance, and common expenses. This will mean that a tenant pays the bill for unexpected repairs or maintenance. There is also a single net lease, under which a tenant pays rent and a pro-rata share of property taxes. The double net lease involves a tenant paying base rent and a pro-rata share of property taxes and property insurance.

• Modified Gross Lease — A hybrid lease combining elements of an NNN lease and a gross lease. A modified gross lease will stipulate that a landlord and a tenant share property expenses such as utilities and cleaning services.

When you need help securing a commercial space for your company, it will be incredibly important for you to retain legal counsel to protect your rights throughout the process. Steinberg Law has helped clients navigate the entire business process from beginning to end, and we have experience working with various administrative agencies all over the United States.

Our firm provides a complimentary initial consultation to discuss your case, and it can be conducted by email, phone, or video conference. You can call (818) 855-1103 or contact our Los Angeles small business attorney online to schedule your consultation.