What to Look for in a Commercial Lease
A commercial lease is one of the most important contracts your business will sign. Unlike residential leases, commercial tenants in BC have fewer statutory protections. As business lawyers in Surrey, we review commercial leases daily and regularly find clauses that could expose our clients to significant financial risk.
1. Rent and Additional Rent (Triple Net)
Most commercial leases are "triple net" (NNN), meaning you pay base rent plus your proportionate share of property taxes, insurance, and common area maintenance (CAM). Always ask for a breakdown and caps on CAM increases. Uncapped CAM charges can skyrocket unexpectedly.
2. Personal Guarantee
Landlords often require business owners to personally guarantee the lease. This means if your business fails, you're personally liable for the remaining lease payments. Negotiate to limit the guarantee to 6-12 months or sunset it after a proven operating period.
3. Permitted Use Clause
This clause defines exactly what you can use the space for. A narrowly worded clause can prevent you from pivoting your business or subletting. Ensure it's broad enough to accommodate reasonable changes to your business model.
4. Assignment and Subletting
Can you transfer the lease if you sell your business? Can you sublet unused space? Many leases restrict these rights or require landlord consent (which can be unreasonably withheld). Negotiate a clause stating the landlord cannot unreasonably withhold consent.
5. Renewal Options
Without a renewal option, your landlord can refuse to renew or dramatically increase rent. Secure at least one 5-year renewal option with predetermined rent increases or a fair market value determination process.
6. Demolition Clause
Some leases allow the landlord to terminate early for redevelopment. Negotiate adequate notice periods (12+ months) and compensation for your business disruption and moving costs.
7. Default and Remedies
Understand what constitutes a default and what cure periods you have. A good lease gives you at least 15-30 days to remedy a breach before the landlord can take action. Have a Surrey business lawyer review these provisions carefully.