Businesses in Wisconsin may lease commercial space to operate. As a result, companies must navigate the process of creating a commercial lease agreement. Commercial leases can raise numerous business law issues, requiring companies to seek experienced legal counsel to help them negotiate a fair and favorable deal.
Key Components of a Commercial Lease
Most commercial leases will need to include several key provisions, including:
- Lease term: A commercial lease can set a fixed term of years or establish a month-to-month or quarter-to-quarter periodic tenancy.
- Rent and additional expenses: The lease should explain the rent charges the tenant must pay and identify other costs, such as utilities, property taxes, or insurance.
- Use clause: A lease can specifically designate the types of business activities the tenant may conduct on the property, ensuring that the landlord does not face liability for zoning or land use violations.
- Maintenance and repairs: Commercial leases should expressly allocate various maintenance and repair responsibilities between landlords and tenants, including which party bears responsibility for snow and ice removal.
- Improvements and modifications: The lease should clearly outline the improvements and alterations that the tenant may make to the premises, specify whether the tenant requires the landlord’s approval for specific changes, and indicate whether the landlord will provide a tenant allowance to finance a build-out or modification of the space.
- Renewal, termination, and subleasing: A commercial lease can address the process of renewing the lease, the grounds on which either party may terminate the lease (including when a tenant may break a lease if a commercial center falls below a certain occupancy percentage), and the tenant’s rights to sublease all or part of the space (with or without the landlord’s approval)
Legal Considerations in Wisconsin
Commercial leases do not enjoy all the same legal protections as residential leases in Wisconsin. As a result, businesses should carefully negotiate lease agreements with commercial landlords to maximize their contractual protections. Businesses should also carefully review leases for potential financial issues that could arise, such as fees or penalties for late rent payments or other lease breaches. Furthermore, the law requires parties to put all commercial leases lasting more than a year in writing.
In lease disputes, Wisconsin courts typically enforce lease terms as written, as they may view commercial tenants and landlords as having roughly equal bargaining positions (compared to residential leases, where a landlord typically has a greater bargaining position than a prospective tenant). Furthermore, the process of evicting a commercial tenant can take less time than an eviction proceeding in a residential lease due to the fewer legal protections afforded to commercial tenants.
Common Pitfalls and How to Avoid Them
Common challenges that businesses may face when negotiating commercial lease agreements include:
- Signing a lease without carefully reviewing it or seeking legal counsel, which can cause a business to miss unfavorable clauses or hidden costs
- Failing to negotiate exclusivity or competition clauses when leasing space in multi-tenant properties, which can prevent landlords from also leasing to competing businesses
- Not addressing termination or subleasing rights
- Failing to consider the consequences of personal guarantees, which can make business owners liable for rent payments even if they have a corporation or limited liability company
- Overlooking parking, signage, or ADA compliance issues
Working with Real Estate Professionals
Businesses can make navigating commercial leases easier by working with experienced real estate professionals, including brokers, agents, and attorneys, who can help companies negotiate favorable lease terms, review contracts for hidden issues, and explain the rights and obligations under leases.
Contact a Real Estate Lawyer Today
Contact Farrow Legal today for a confidential consultation with a real estate attorney for help negotiating a commercial lease agreement that protects your business’s rights and interests.