What due diligence do you need to perform for a commercial lease?

On Behalf of | Feb 21, 2019 | Real Estate

If your organization is considering leasing new space, you need to do some due diligence. Naturally, need to nail down the essential terms: How much the rent will be, the term of the lease and what renewal rights you have. You need to know what changes you can make to the property. You’ll want to read any proposed lease carefully and have a lawyer look over any terms you don’t fully understand or have objections to.

Before you sign the lease, however, you also need to check on a few key land use and zoning issues, because you don’t want to rely on the property owner’s understanding of whether the premises are truly suitable for your business.

What if the current occupant is in a similar business? Doesn’t that mean the property is zoned for your business? Not necessarily. Even if the most recent occupant was in the exact same industry, you can’t assume you’ll have no zoning issues.

The current use may be non-conforming. If a new zoning or land use regulation has been passed, the most recent occupant may have been “grandfathered in,” or allowed to violate the new regulation until the end of their occupancy. A new occupant may not have the same rights.

There may be a variance in place. The most recent occupant may have filed for a zoning variance, allowing it to operate outside one or more zoning regulations. Such a variance generally acts as a specific permit for the business who was granted the variance. If you want the same rights, you would have to get your own variance approved.

There may be conditions of use. Even if your business meets the zoning requirements, be aware that these may have conditions. The conditions may include fulfilling a certain requirement such as providing a certain amount of parking.

There may be limitations on signage. Before you hang your new sign, make sure it complies with zoning laws, which may limit things like the size of the sign, its placement, its appearance and its inclusion of certain things such as foreign language.

You should never sign a commercial lease without a full understanding of how land use and zoning restrictions will affect your business. If time is of the essence, your lease could include a contingency clause saying that the lease is binding only upon zoning approval.

Many businesses benefit from legal assistance with commercial leasing, including zoning and land use issues. An experienced real estate lawyer can negotiate, draft or review your lease and perform any necessary due diligence.