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Real Estate Planning Blog

Thursday, June 1, 2017

Pitfalls to Avoid in a Commercial Lease in NY

Do I need a real estate lawyer to review my commercial lease?

Signing a lease on a building is often one of the most critical first steps to starting your successful new business.  By signing a commercial lease, you will obligate yourself to pay large sums of money for several years to come.  Given the seriousness of your lease obligations, and the fact that most leases will be written pro-landlord, it is critical that your Staten Island real estate attorney review your lease with an eye for the following potential lease traps: 

  1. Personal guarantees:  A personal guarantee will obligate you to pay the lease balance in the event your business does not succeed.  Signing a personal guarantee will essentially eliminate the protections provided by your corporate entity.  Guarantees may be hidden within the lease agreement.  While at times a guarantee cannot be avoided, your attorney can help to minimize your personal exposure. 

  2. Construction and repair obligations:  Often, commercial leases will obligate the tenant to make certain repairs, maintain the building, or alter the building in some way.  Your lawyer will help to ensure your obligations are in line with your use and length of tenancy.  For instance, a three-year tenant should not be required to make significant renovations, absent unusual tenant use. 

  3. Restrictive covenants:  In most cases, you do not want your landlord to rent to your direct competition.  Your lease should contain a restrictive covenant that will protect you from having to compete within your immediate vicinity. 

  4. CAM fees:  Many commercial leases will include common area maintenance fees.  These fees are like HOAs, but for commercial buildings.  All tenants will share in the cost of keeping up the parking lot, landscaping, security, and other common areas.  If your CAM obligations are drafted so that expenses are shared by the number of tenants, you could be left holding the bag if several tenants go out.  Instead, CAM should be based on the total rentable square feet or capped within the lease. 

Start your business off right by ensuring your commercial lease meets all of your needs and does not impose unfair obligations that could harm you in the long run.  Contact a commercial real estate attorney as soon as possible for assistance with negotiating and reviewing your commercial lease.  





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