Many businesses enter into commercial leases for various reasons, whether they are operating as the landlord or the tenant. A retail business may lease space for its operations in a strip mall. A real estate company may lease commercial properties to stores and other businesses. A government entity may enter into a commercial lease to rent additional office space on a temporary basis until it can purchase more real estate or complete construction on new or existing buildings. While some contract provisions are similar from one commercial lease to the other, other lease provisions are unique to some types of businesses. These provisions are necessary to best protect and support the operations of the relevant businesses involved in the lease.
For example, an exclusive use clause is particularly important for commercial leases in the retail context. In terms of the tenant, an exclusive use clause will set forth what uses of the property are prohibited, perhaps based on other tenants’ exclusive uses. This prevents a new tenant from leasing a portion of the premises for the same purpose or use as an existing tenant. In other words, it prevents a direct competitor from renting space in the same building as an existing business.
Another type of commercial lease provision is the assignment clause. This provision permits tenant businesses that are successful to sell their businesses without breaching the terms of the commercial lease. Likewise, an assignment clause can allow a failing business to find replacement tenants to take over its lease in order to avoid default.
A new or start-up business with a fair amount of risk may want to include a cancellation clause in its commercial lease. Under this type of provision, a tenant business can cancel the lease if it doesn’t meet certain income projections within a specific time period, such as six months, or one year. Again, this provision can help the business avoid defaulting on the lease if the business fails.
As you can see, commercial leases tend to raise complex issues that can be difficult for a new business owner to handle. It is always best that you consult with an experienced California business attorney in order to ensure that you are both complying with all of your obligations under the lease and benefitting from the lease. At Heit Law Group, P.C., we offer general counsel services for many California businesses, including dealing with lease-related issues. Our California business lawyers know how what you need to ensure that your start-up complies with all state and federal laws relating to your business transactions. Call our office today to set up your complimentary evaluation.