Commercial leases can contain a variety of different terms. In addition to establishing base rent payment amounts, commercial leases tend to allocate responsibility for maintenance. There may be additional costs associated with services provided by the landlord.
Both the landlord and the tenant may negotiate to include specific protective clauses. Landlords might limit tenants to one specific business function, while tenants may request that landlords not lease any adjacent spaces to businesses offering the same goods or services.
Commercial leases frequently create a multi-year working relationship between business tenants and commercial landlords. Ideally, both parties can fulfill the lease as signed. However, it may be necessary to address the possibility of early lease termination in case the tenant’s business fails or chooses to relocate. How do leases address early termination?
By acknowledging unforeseeable challenges
Natural disasters, acts of war and other extreme, unpredictable events can affect business operations. They could prevent a company from acquiring the materials needed to manufacture products or make a space inaccessible to visitors for months on end. The inclusion of a force majeure clause in a commercial lease may allow either party to terminate the lease in cases where uncontrollable factors prevent them from upholding their obligations.
By allowing for lease assignment
In some cases, a company’s needs evolve after a business leader signs a lengthy commercial lease. Changes in business function, issues with the local market or rapid growth might all render a particular space inadequate for a company’s needs. Other times, the looming dissolution of the business can make a business lease more of a liability than an asset.
Lease assignment terms may allow the tenant to bring in a replacement tenant to take over the remainder of their lease. Such arrangements prevent the tenant from facing claims for future unpaid rent and protect the landlord from having a vacant unit sit unoccupied for months. Landlords may choose to restrict lease assignment or to reserve the right to reject a prospective tenant in a lease assignment arrangement.
Commercial leases are executory contracts that need to contain clear language protecting both parties. Addressing the possibility of an early commercial lease termination can be beneficial for both commercial property owners and business leaders seeking rental facilities.