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A review of important lease terms, Part 3

The lease is the primary document that defines the relationship between the property owner and lessor. It serves as the primary body of language for which either party can seek redress for harms. It is thus crucial that both parties understand what they are signing and how those terms operate. As discussed previously, even describing the property is critical. This post will continue discussing crucial lease terms that should be included in every post.

Some lesser-known clauses that parties don't consider deal with:

  • Subletting;
  • Dispute resolution procedures; and
  • Options to renew.

Subletting occurs when the primary tenant leases all or a portion of their leased property to another tenant. Sublets are a problem for property owners because they are not in complete privity of contract with the sublessor which reduces the property owner's rights to recover against the lessor. You continue to retain the right to recover from the primary tenant. Many leases require sublets to be approved by the landlord, which reduces that risk.

Disputes will arise, it is inevitable. In the commercial context, it is crucial you have an orderly way to discuss these disputes and resolve them amicably. Unresolved disputes could severely damage your relationship with the property owner. It is far cheaper and easier to work together, than opposed to one another.

Finally, renewal options are a frequent term in leases. Renewal options allow the tenant to unilaterally extend the lease for a set period. Renewals are useful in continuing the leasing relationship. Many tenants are unwilling to submit to long-term leases therefore these options allow tenants to stay as long as they like without committing beyond their financial resources.

If you are considering signing a commercial property lease, you should probably contact a lawyer to review the terms. Many commercial leases go for many years, sometimes 10 or 20. You should understand every facet of the lease you are signing. The commercial lease may dominate your business activities for the foreseeable future, you should know it better than anyone. A lawyer can assist you by breaking down the lease and identifying provisions that are unfavorable to you.

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