Consider hiring lawyer to look over lease

September 20, 2015

Q: I have found space to lease for my new washateria, and the landlord has given me her standard lease contract. Should I just sign it?

A: Before you sign anything, make sure you understand and agree with all the terms of the contract.

"There is no such thing as a 'standard lease,' and landlords almost always negotiate," says Benjamin Miller, a Houston real estate attorney with Sponsel Miller Greenberg. "Don't lose sight of the fact that the 'Standard Form Lease' represents the landlord's wish list and, if not appropriately modified, may not serve your interests when issues arise."

A lease is much like any business agreement in that it sets out the parameters of a business relationship. You cannot easily break or change a commercial lease. It is a legally binding contract, and a good deal of money is usually at stake.

Hiccups in relationship

When everything goes as planned, most any lease will serve the parties well. The true test occurs when there are hiccups in the relationship. If the lease has not been drafted carefully, a hiccup can become a major problem without a clear solution.

There are, in general, three types of commercial leases. With a gross lease, the renter pays the landlord a fixed monthly rent. It is then up to the landlord to pay all the expenses of operating the building. In a triple net, or NNN, lease, the tenant not only pays base rent, but also part of the building's operating costs. These costs include property taxes, insurance and common area maintenance. Hybrid leases have features of both gross and triple net leases.

Triple net costs are shared according to the percentage of the tenant's square footage to the building's total square footage. So, Miller advises, "Pay attention to what is included in NNN costs and get the right to audit the landlord's cost records."

Maintain the areas

Common area maintenance is generally the amount of additional rent charged to the tenant to maintain the areas of the property shared by all the tenants and from which all tenants benefit. These include repairs, cleaning, janitorial and trash services, as well as personnel costs associated with the property. Most often, common area maintenance doesn't include capital improvements, tenant build-out expenses, legal fees, costs for services to other tenants, commissions to brokers, or costs arising from a landlord's negligence.

You should seriously consider having your lease contract reviewed by an experienced attorney.