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Red flags to watch for when signing a commercial lease

Deciding to lease a commercial property in Michigan is a significant step for any business owner. It is an exciting venture that brings the promise of growth, expansion and new opportunities. Not every commercial lease you come across will be in your best interest, and some might contain elements that could be detrimental to your business in the long run.

While the prospect of finding the perfect location can be alluring, you should be aware of potential pitfalls and red flags in the lease agreements you consider.

Unspecified common area maintenance fees

In many commercial leases, there is a provision where tenants contribute to the maintenance of common areas. If these fees are not clearly defined or if they give the landlord too much discretion in determining costs, you might end up paying more than you anticipated.

Stringent termination clauses

A lease that does not provide you with a reasonable exit strategy can become a trap. You want flexibility, especially if your business circumstances change. You need to understand the conditions under which you can terminate the lease and what penalties, if any, you might face. For instance, if you cannot leave when the lease terminates, you may end up paying up to four times as much as the listed rate.

Ambiguous repair and maintenance responsibilities

You should determine who handles repairs and maintenance, especially for significant systems such as heating, air conditioning and plumbing. If a lease is vague on this aspect, you might find yourself responsible for major repairs you did not anticipate.

Unclear rent increase structure

While it is common for commercial leases to have provisions for rent increases, you should be wary if the method for determining these increases is not transparent. Avoid leases that give landlords unchecked power to hike rents without clear parameters.

Vague restrictions on business operations

Some commercial leases might have clauses that limit the type of business you can conduct or the hours of operation. Such restrictions can affect your business’s growth and profitability. Ensure the lease you sign allows you the freedom to operate your business effectively.

Being cautious and attentive to these details can save you from potential pitfalls and ensure that the lease you sign supports the growth and success of your business.