a lease review is a critical step in the leasing process. It's essentially a deep dive into the lease agreement's terms and conditions to ensure it aligns with the tenant's needs and goals. Here are some key aspects that are typically examined during a lease review:
Lease Terms: This includes the length of the lease, rent amounts, and any options for renewal. The terms should align with the tenant's business plans and financial capabilities.
Rent Increases: Most commercial leases include provisions for rent increases or escalations. It's important to understand how often these increases occur and how they're calculated.
Operating Expenses: The lease should clearly define who is responsible for operating expenses such as utilities, maintenance, property taxes, and insurance. In some leases, the tenant is responsible for a proportionate share of these costs.
Repairs and Maintenance: The lease should specify who is responsible for maintenance and repairs of the property, including common areas, building systems, and individual leasehold improvements.
Alterations and Improvements: If the tenant plans to make any changes to the space, the lease should outline what alterations are allowed and who is responsible for the cost.
Default and Termination: The lease should define what constitutes a default, the remedies available to each party, and the rights and obligations upon termination of the lease.
Assignment and Subletting: The lease should specify whether the tenant has the right to assign the lease or sublet the space, which could be important if the tenant's business needs change in the future.
A lease review should ideally be performed with the assistance of a commercial real estate professional and a real estate attorney. This can help to ensure the tenant fully understands their rights and obligations under the lease, identify any potential risks or liabilities, and provide a basis for negotiating more favorable terms. After all, a commercial lease is a binding legal contract and can have significant financial implications for a business.