Tenants: Beware Continuing Liability

In the case of this unsuspecting business owner, he should have looked over the assignment language before signing it and requested that at the end of the first extended term, he would be let out of his obligation. The landlord had to approve the new owner (assignee) and would not likely have approved them if they were not credit worthy or had the finances to fulfill the financial obligations of the lease.

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Common Area Expenses For Business Lease

When signing a commercial lease, it is ever so important to understand which building expenses you are directly or indirectly responsible for paying, especially since these expenses could easily equate up to 50% of what the monthly rent is.   If it is a typical retail store or commercial building lease, it will be a triple net lease aka NNN lease.  In a triple net lease the tenant is responsible for practically every expense incurred in operating the commercial building or shopping center.

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No Such Thing As a Standard Commercial Lease

There are many types of lease forms used by the landlord community. Some are relatively short, ranging from 10-30 pages, while others can be up to 80-90 pages. Lease forms are typically described as triple net, modified gross and gross. The interpretation of how the leases are described is not always consistent within the industry and is often confusing for tenants. It important for the tenant to understand the varying lease terminology as discussed between the parties in a transaction and used in the lease itself to avoid any surprises or misunderstandings once the lease is signed. For a full glossary of terminology, visit www.theleasedoctor .com.

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Take caution in commercial leasing

Unlike residential real estate where you have consumer laws to protect the buyer or lessee in a transaction, commercial real estate does not exactly fall under the same jurisdiction.

In a noncommercial real estate transaction, the agent is required by law to have myriad disclosures signed by all parties, and strict disclosure laws must be followed. In commercial real estate transactions, especially leasing, there are no specific disclosure laws or paperwork required.

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