Commercial leases are often worth several million dollars over the span of their term and are often extremely detailed. Most global and national developers use lease formats that are long, complex and extremely unfavorable to tenants. Many are routinely subject to not only a base rent, but additional fees in the form of percentage of the tenant’s revenue, real estate taxes and common area maintenance charges (“CAM”).
Many commercial leases have language that allows the landlord to keep increasing CAM charges significantly over the term of the lease. Tenants often end up paying more in these additional fees than their base rent. Furthermore, commercial leases also include severe restrictions on change of ownership of the tenant’s business. They often also include radius restrictions for the tenant to open other businesses, as well as a right for the landlord to relocate the tenant when it wishes.
They can also include a requirement for personal guaranties as well as buitl-in liens on the property of the tenant. Some also have clauses that even transfer ownership of trade fixtures of the tenant to the landlord. Many of these terms can contain severely negative financial consequences for the tenant. Therefore, terms of a commercial lease must be very carefully understood and negotiated.