What red flags should you look out for in a commercial lease?

What red flags should you look out for in a commercial lease?

On Behalf of | Jun 21, 2022 | Commercial Real Estate |

Many commercial properties in Mississippi have longer lease terms than residential rentals, so it is particularly important that you understand the terms you agree to before you sign on the dotted line. When reviewing a potential commercial lease agreement, there are certain elements that may make you want to reconsider renting a particular commercial property.

According to CBI Commercial, a strong commercial lease is thorough and clear in terms of your own obligations as well as those of your landlord. Not all commercial leases protect the interests of both sides, however, and you may want to give some additional thought to signing a commercial lease agreement that contains any of the following.

Unreasonable tax-escalation terms

Many commercial leases contain tax-escalation provisions, which allow the landlord to raise rental rates if the taxes associated with the space increase. A tax-escalation provision, in and of itself, is not cause for alarm. However, you want to review this area of the lease carefully to make sure you are not agreeing to an unreasonable escalation rate.

Lengthy renewal obligations

It is not uncommon for a commercial lease to last two years or longer. However, if your lease has a renewal clause that asks you to review the space for longer than two years at a time, reconsider. You may not want to agree to rent the property at all, or you may want to ask the landlord to change this part of the lease before you sign it.

Unless you have considerable experience in reviewing commercial leases, it may serve you well to have someone well-versed in this area assist you.