Commercial leases allow property owners to capitalize on vacant facilities and businesses to readily access commercial spaces. Leases allow startups and growing businesses to secure office space or retail facilities without needing the capital or credit necessary to purchase commercial real estate.
In theory, the clauses included in a lease help clarify the obligations that each party has to the other. Unfortunately, sometimes tenants and landlords may end up embroiled in disputes because of the terms included in a lease.
What commercial lease clauses are relatively likely to trigger conflict?
Maintenance allocation and fee clauses
Commercial tenants are not always aware of the implications of different maintenance fees and responsibility clauses. They may not understand initially, for example, that they have to handle the logistics and financial investment required to make any repairs to the property if a system fails. On the other hand, they may not understand the variable way in which the landlord calculates common area maintenance (CAM) fees. They may expect a flat fee but might end up with a substantially larger bill one month when compared with other recent months. Landlords and tenants may end up fighting over who is responsible for maintenance and repairs or how much the landlord can charge for their services.
Lease termination clauses
There are several types of clauses that landlords may include in leases that address the early termination of the lease. There may be a clause prohibiting lease assignment if the tenant wants to vacate the premises before the lease ends. There might be a force majeure clause that the tenant hopes to invoke. They could end up disagreeing with the landlord about whether or not the situation justifies early lease termination. Any rules that allow tenants to limit rental payment responsibilities if they terminate the lease early are a potential source of conflict.
Clauses restricting economic activity
Landlords may include provisions in their leases that limit how tenants use the rental space. They might limit the tenant to certain types of functions or a specific industry. They may include clauses that prevent one tenant from competing with any other pre-existing tenant in the building. In some cases, landlords may restrict the flow of customers or clients to a facility. Any of those clauses could impact how the business operates or pivots to adjust to the current economy. The tenant may end up disagreeing with the landlord about the way in which they use the space.
Both tenants and landlords need to review lease documents carefully before signing a lease or whenever facing operational challenges. Either party to a commercial lease may need help navigating a dispute about the lease itself. Consulting with someone familiar with commercial leases and real estate laws can help both landlords and tenants push for the best possible outcome in a commercial lease dispute scenario.