Table of Contents
There are many pitfalls in taking a commercial building on lease. It is imperative to have a thorough understanding of the area and one’s own requirement from the premises. Commercial lease agreements usually involve a huge monetary outgo on the part of the tenant and care should be taken in executing a deal. We take a look at some of the important aspects of such a deal:
Total cost involved
There are various costs involved in taking a building on lease and running it on day to day basis. These include property tax, repairs in the building, cleaning and upkeep, etc. There are two ways in which these costs can be taken care of. One in which all these costs are borne by the tenant alone. Another in which these costs are split between the landlord and the tenant in a certain ratio. It is imperative to know before the building is leased as to how these costs will be incurred.
Actual usage of property
Certain types of activities are allowed in a particular locality or zone or area by the government, hence, other commercial activities are illegal. It is absolutely essential to know the zonal laws and whether the area allows mixed use of property or is completely residential or any such provision in the law for that particular locality where a building or even a floor is being leased. If the property is being taken on rent for office purpose then different set of rules will apply and if the property is being taken for industrial use then another set of rules will apply. The tenant should be clear about these provisions of law.
The property being taken on rent may be subjected to some renovation to suit the actual business requirement. However, the landlord or the zonal law may prohibit any or part of the renovation. It is important to get clarity on how far the renovation work can be carried out. Here again, the renovation cost may be split between the landlord and the tenant. Clarity on how the cost will be split, if at all, will be beneficial for the tenant.
Hiring a lawyer/CA
Taking legal help or financial advice from a professional is always better, especially if the lease tenure is long or when the rent is high. One cannot afford to go wrong in case a lot is at stake. Professional help is especially required for startups that are usually run by relatively inexperienced people. A lawyer or a Chartered Accountant can bring in all the perspective which may not come to administration executive (of a company) who may be entrusted to find a sound rental deal. Sometimes, hiring both a lawyer and a CA can be a sound option.
Taking everything in writing
It is important to take everything in writing from the landlord. Every small aspect of the terms and conditions decided between a landlord and tenant must be in writing to be enforced later.