Nine Truths About Retail Leases

Signing a lease for your first (or your latest) retail enterprise can prove a daunting occasion. This written agreement between landlord and business tenant is a binding document, after all. And it commits you to an arrangement with another party that can be complicated and prone to misinterpretation.

Here’s some data points on the things.

  1. Leasing a commercial space generally takes place in two parts: the offer to lease and the lease itself. Be ready to negotiate and to prepare a written sub-offer.
  1. Given the inherently legal nature of a lease, tenants would be well advised to seek legal consultation before signing on.
  2. Keep your options open. If you can, identify two spaces that meet your needs, and let the leasing agents know about each other. Competition can only spell good things.
  3. Be solid on all the dates, including move-in, and make sure the landlord specifies an alternative if the space isn’t ready on time.
  4. Remember the power of restrictive clauses. You need to consider what safeguards the lease agreement includes that prevent competitive businesses from infringing on your territory (e.g., a provision that the landlord cannot rent to a like business in the same building)?
  5. Include a comprehensive account of included building services, like wifi, cleaning and utilities. Both parties have to be clear on who’s paying for what. Don’t forget property taxes.
  6. Be aware of the escalation clause, the section in a lease agreement that deals with a landlord’s right to raise rents. Ideally, you will negotiate this together.
  7. Consider including a renewal formula that guarantees you space when your lease expires in the original agreement. Otherwise, your landlord isn’t legally obliged to hold it for you.
  8. If you think you might change what you use the premises for, find out if there would be any restrictions or requirement for written permission.

A commercial lease is a big deal, and it behooves anyone entering into one to spend some time thinking about it. For more information, check the “Signing a Commercial Lease” page on the federal government’s Canada Business Network site.