Because commercial tenants are afforded fewer protections than residential tenants, it is important for commercial renters to carefully negotiate the terms of their leases. Unlike many residential leases, commercial leases often do not rely on standard forms. A small business acquiring a commercial property should carefully analyze the provisions governing its responsibilities to the landlord. These include the duties to pay rent, property taxes and operating expenses, repair the rented space, accommodate disabled individuals, and comply with applicable environmental regulations.
Rental, property tax and operating expenses. The failure to pay rent is often the primary source of disputes between the parties in a lease. If a renter defaults, this may trigger acceleration clauses in the contract which compel the payment of all rent due under the lease or the landlord may assert the right to terminate the contract. Tenants may be required to pay their proportionate share of property taxes, including sales, rental and income taxes. In addition, payment of operating expenses may be included as a separate item in the lease agreement, but certain operating costs should generally be excluded from the tenant’s lease, such as capital improvements.
Duty to repair. A commercial tenant is often obligated to make most repairs and maintain the premises in good condition. The landlord of the property is typically required to fix the structural elements of the property and the common areas. Commercial renters cannot repair defects and subsequently deduct rent, which is a remedy commonly utilized by residential lessees when a landlord does not make timely repairs.
Disability law accommodations. Under the Americans with Disabilities Act (ADA), places of public access are required to provide reasonable accommodations for individuals with disabilities. Commercial leases should contain provisions assigning responsibility for complying with ADA regulations, such as which party is responsible for constructing a ramp for wheelchair access.
Environmental regulations. When a hazardous substance is detected during the term of the lease, both the tenant and landlord are deemed legally responsible under the Comprehensive Environment Response, Compensation and Liability Act. Lease agreements should contain provisions specifying the obligations of each party with respect to environmental regulations.
It is important for commercial tenants to be prudent about reviewing their lease agreements, paying close attention to what they are required to pay, how these expenses are calculated, and what the pro rata share of their responsibilities are in complying with federal and state regulations. Contact Shane Coons for assistance with your lease or other real estate issues at 949-333-0900 or visit www.ShaneCoonsLaw.com.