Your new business is finally at the stage where it's time to lease commercial space. But there are pitfalls to avoid. Leasing commercial real estate is different than renting residential real estate. Find out what can happen, and how to avoid it.
After you're all settled into your new leased business space, and you've opened your doors to customers, an official drops by from the town hall. It turns out that your location isn't zoned correctly for your business. Even though you asked your real estate agent specifically to only show you property zoned for commercial use, she neglected to make sure it was zoned for your type of business.
Most towns have very specific regulations in place that govern what kinds of business can operate in certain areas. Their reasons may include family neighborhood and decency concerns, parking availability, or heavy delivery vehicle traffic.
Before you sign any commercial lease, ask a commercial real estate lawyer to conduct due diligence on the zoning regulations in existence. Don't rely on your real estate agent for this important step.
Since you're only leasing commercial real estate and not purchasing the property, you may assume you don't have to worry about title ownership. Title disputes most often happen when the owner tries to sell the property while there are hidden liens against the property. But a title dispute can also affect you as a leaser.
If the owner leases the commercial property to you and there is a lien against it, their authority to lease the property and collect rent may be legally disputed. The unknown creditor could file papers to have your business concerns removed from the property. Worse, the creditor could claim that since your assets are on the premises of a building they hold rights to, your assets belong to them.
A commercial real estate attorney can have a title search on any property you're thinking of leasing for your business. In addition, they can match you up with a title insurance company that will cover your interests in the event that the title is ever disputed during your tenancy.
As a business owner working with a real estate agent, you reasonably assume that the person listing the property for lease has the right to rent out the space. You may not find out until it's too late that your contract is actually with another lessor, and not the original owner. Unless your lessor has express written permission to sublet out the commercial space to a third party—you—you may be in a situation where your business has no right to take up space on that property.
This is a common problem in commercial real estate dealings. It is possible that the previous business renter has gone out of business but still remains under contract for that office space. They may illegally subcontract out the property in a bid to try to recoup their monthly rent obligation.
Have a real estate attorney go over your commercial office lease contract so you know exactly where you stand in the lessor/lessee relationship.
Leasing commercial real estate is a complicated business that you should only undertake with the consultation of a commercial real estate professional. Consider contacting a company such as Steve Butcher Sr for more information and advice.