Commercial lease agreements are one of the most common contracts small businesses deal with.
If you’re not operating your business out of your home, or if you don’t own the building your business operates out of, chances are you’ll be signing on the dotted line as a tenant in a commercial lease agreement.
These documents can be lengthy and complicated, with unusual terms like triple-net, insurance requirements, hazardous waste language and more. It can be a lot for a busy small business owner to process. And, if you’re just getting your business up and running, funds for attorneys can be limited.
Do you need a lawyer to draft or review and edit your commercial lease agreement?
As we lawyers are fond of saying, it depends. There are a number of variables that may affect your decision. Ask yourself these questions to get an idea of what makes sense for your particular situation:
- Do you have a commercial real estate broker working for you? If so, the broker likely has commercial lease forms that he or she can adapt to your situation. While real estate brokers are not allowed to give legal advice, most of them have seen a lot of leases, and their forms tend to be pretty good. Also, having your broker do as much of the drafting as possible saves you money: Brokers are typically paid by commission, not hourly.
- Are you the tenant or the landlord? Typically, the landlord, the landlord’s broker, or the landlord’s attorney will prepare the first draft of the commercial lease, with the tenant, the tenant’s broker, or the tenant’s attorney reviewing and suggesting changes.
- How complicated and expensive is the lease? If it’s a 20-year lease of an industrial building, with relatively complex hazardous waste and other issues, it’s probably worth it to involve an attorney. On the other hand, if it’s a short-term lease of space for a fruit stand, it might be best to save your money.
- Does the other party have an attorney? If so, that may be an indication that there is sufficient complexity to the deal to warrant at least having an attorney review the lease.
- Do you or your broker have a relationship with an attorney who is knowledgeable about commercial leases? If so, involving an attorney will probably be faster and more effective than wading into the legal marketplace and shopping for a lawyer.
Have you decided to hire a lawyer to help with your commercial lease agreement?
If you do decide to engage an attorney to draft or review a commercial lease agreement for you, there are some steps you can take to save yourself time, money and hassle. This assumes you’ve located a lawyer either because you already knew him or her, or you found the lawyer via referral.
- Tell the lawyer specifically what you want him or her to do. Is it drafting the commercial lease or reviewing it and providing you with comments and recommendations? Reviewing will usually be less expensive.
- Ask the lawyer to quote you a flat fee for the work. Tell the lawyer how long the lease is or, if the lawyer will be drafting the lease from scratch, give him or her some details about the transaction to help the lawyer give you a price. Ask for a fixed price, not an estimate. When drafting from scratch, some lawyers are reticent to quote a fixed price, because they are not sure of all the issues before they start. Our firm, EagerLaw PC, offers a fixed price review and written comments for commercial leases for $899.00 for leases up to 25 pages.
- Tell the lawyer when you need the work to be completed. Ask the lawyer to agree to have it completed by that date. One common complaint from small business owners and brokers alike is that lawyers take too long to do commercial lease work. Get a commitment from the lawyer up front.
- Once you have agreed on a price and a timeline, make sure the lawyer has the letter of intent or similar document that lays out the critical pieces of information about the lease. This typically includes the price, the term of the lease, how maintenance is to be handled, etc. Giving this to the lawyer up front can avoid time-consuming (and potentially expensive) back-and-forth as the lawyer tries to learn enough about your wishes to make sure the lease achieves them.
There is no question that many, many small businesses benefit from involving an attorney in their commercial lease transactions. Small business owners who approach the attorney relationship prepared to get the most out of it are more likely to come away with a positive experience.