This article is written by Pravin Kumar Ray a 3rd-year law student studying at Sarsuna Law College.
When purchasing a commercial lease, there are several business and legal issues that must be considered. Here are some common problems faced in purchasing a commercial lease:
Lease Terms and Conditions: The terms and conditions of the lease agreement are critical when purchasing a commercial lease. You should carefully review the lease agreement to ensure that it includes all the terms and conditions you need to operate your business effectively.
Lease Transfer Restrictions: Many commercial leases include transfer restrictions that limit the ability to transfer the lease to another party. These restrictions may require the landlord’s approval before transferring the lease. As a potential buyer, you need to ensure that you can transfer the lease to another party without any significant restrictions.
Rent and Operating Costs: The rent and operating costs are significant factors when purchasing a commercial lease. Ensure you understand how to rent and operating costs are calculated, and whether there are any rent increases in the future.
Condition of the Property: Before purchasing a commercial lease, you need to assess the condition of the property, and whether there are any repairs or renovations required. If there are repairs or renovations required, you should factor those costs into your purchase price.
Compliance with Laws and Regulations: As a potential buyer, you need to ensure that the property and lease comply with all applicable laws and regulations. This includes zoning laws, building codes, and environmental regulations.
Legal Disputes: There may be ongoing legal disputes between the landlord and the current tenant that could impact your ability to operate your business on the property. You should obtain legal advice to understand the impact of any ongoing disputes before purchasing the commercial lease.
Termination: Any commercial tenant should be aware of the procedures for terminating a lease early as well as the conditions for terminating a lease prior to any automatic renewal taking place. If the lease doesn’t specify a right to cancel, consider securing a right to terminate early in exchange for the payment of a fixed amount of liquidated damages to the landlord to give yourself a way out. It’s also important to pay careful attention to and adhere to notice provisions at the end of the lease period.
Commercial Leases vs. Residential Leases
It’s important to be aware of the fact that commercial leases and residential leases have major differences, especially in legal terms.
First, commercial leases are not subject to as many consumer protection laws as residential leases. For example, the privacy of a tenant is not guaranteed with a commercial lease, and there is also no limit to the amount that can be charged for a security deposit.
Second, there is no standard form that can be used for a commercial lease. While this does make writing these leases a little more time-consuming, it also means that the commercial lease can be customized so that the needs of the landlord will be fully met. If you are a tenant, however, this lack of standardization means you should closely review a commercial lease before providing your signature.
Thirdly, commercial leases are considerably harder to break than residential leases. A commercial lease is a type of legal contract, and when these leases are broken, a great deal of money stands to be lost.
Lastly, commercial leases usually involve a longer negotiation period than residential leases. This is because commercial leases often need to include language that covers the individual needs of a business owner, and landlords will mostly be willing to meet these needs, as long as their compliance results in a signed lease.
CONCLUSION
In summary, when purchasing a commercial lease, it is critical to consider the lease terms and conditions, lease transfer restrictions, rent and operating costs, condition of the property, compliance with laws and regulations, and any ongoing legal disputes. Seek legal advice from a commercial real estate attorney to ensure that you understand your rights and obligations before purchasing a commercial lease.
Since the commercial space is a built-up area rather than a plot of land, the parties must acquire approvals such as the completion certificate, occupancy certificate, and no-objection certificate from the concerned authority for the fire extinguisher installation certificate for lift operation. In addition, depending on how the lessee intends to use the commercial property, the parties might require other specific permissions.
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