When establishing a business in Florida, most entrepreneurs will need a proper place to execute their enterprise. Typically, the solution is to sign a commercial lease, a contract wherein a landlord agrees to rent commercial real estate to a business.
Nonetheless, entering a commercial lease agreement is not as simple as visually assessing the premises and signing the paperwork. Keep reading to understand all you need to know about commercial leases in Florida. To ensure a stress-free experience when signing a Florida lease, contact Jurado and Associates, P.A. today at (305) 921-0976.
Step #1: Understand the Terms of Commercial Leases in Florida
Before we move into full detail about commercial leases in Florida, it is essential to understand the terms. Hence, we have built a glossary that will help you to understand them.
In essence, the rent represents not only the base amount to be paid monthly but also additional operating expenses and scheduled increases. Hence, it is essential to assess what the actual cost might be in the medium term. In “full service” rent agreements, the landlord covers the operating expenses for the first year (i.e., taxes, insurance, and utilities). In “net rent” agreements, the tenant must cover some or all operating expenses.
The term “premises” refers to the location of the space and area to be occupied by the business under the commercial lease.
The term of a lease is the period in which the premises will remain occupied by the tenant. Usually, the term also includes a renewal right to extend the commercial lease.
Also known as an “earnest payment,” security deposit refers to funds held in escrow to ensure the landlord is against default by the tenant. To determine a set amount, factors like credit history, brand reputation, and others will heavily influence the negotiation process.
An improvement allowance is a sum of money the landlord agrees to spend to renovate the commercial space before the tenant leases it. Typically, valuable tenants tend to be an advantage when negotiating this specific term.
Exclusive Use in Commercial Leases in Florida
Exclusive use is a clause used to prevent landlords from leasing commercial spaces within the same building or complex to one of their tenants’ direct competitors. Traditionally referred to as an “anti-competition provision,” a term of exclusive use is crucial to ensure fairness.
Assignment and Subletting
A term of assignment and subletting permits the tenant to lease commercial property to a subtenant. Negotiating this type of clause may be complex, so make sure to consult with an expert commercial lease attorney.
Renewal Rights in Commercial Leases in Florida
Renewal rights grant the tenant the right to renew the lease before the commercial space is offered to anyone else once the contract’s timeline is over. Entrepreneurs must protect their companies from being forced to move at the close of the lease, which requires legal assistance to negotiate proper renewal rights.
A term detailing “expansion rights” is crucial to ensure fairness in case a business grows and expands within the commercial building under the lease. Accordingly, what happens if the growing company needs more space before the lease ends? An experienced attorney has the answer.
Rent Abatement for Interruption in Use
Florida’s climate and location make the state highly prone to certain casualties, such as hurricanes. A rent abatement for interruption of use provides whether the landlord will reduce or temporarily eliminate the rental cost in case of casualty.
Eliminate Removal/Restore Obligation on Tenant
It is not uncanny to find landlords that charge for the improvement of the premises when a tenant departs. Accordingly, pay attention to identifying whether a contract contains this type of provision.
Alterations, HVAC, Environmental, ADA, and Code Compliance
The lease agreement must provide:
- What non-structural alterations will require the landlord’s consent to be made?
- Can the tenant alter the premises without prior approval?
- Which party is responsible for covering HVAC-related expenses?
- Is the landlord compliant with environmental warranties?
- Does the landlord provide warranties regarding ADA and code compliance?
Step #2: Be Aware of the Elements in Commercial Leases in Florida
Now that you know what the main terms of commercial leases in Florida are, the next step is to learn more about the elements that compose them. Below, find all the information you need to read.
Drafting a Proper Letter of Intent for Commercial Leases in Florida
Before the commercial lease agreement is actually signed by both parties, a letter of intent (LOI) must be drawn up as a preliminary agreement. In this document, the landlord and the tenant will outline the essential items to the contract.
Hence, each party can assess whether they can proceed with the agreement or not. Although not a part of a contract, the letter of intent is the first step to establishing a formal relationship between prospective landlords and tenants.
Pay Attention to the Parties’ Information
Once the parties have agreed to the terms expressed in the LOI, it is time to move forward. When drafting a commercial lease agreement, the parties must provide accurate information only, including:
- The landlord’s complete name
- The business’s full legal name (in the tenant’s place)
- The business’s designation (e.g., LLC, Corporation, etc.)
If the company has not been opened yet, the responsible party must provide proper identification to ensure the lease’s enforceability.
Taking a Closer Look at the Premises Clause
The lease agreement must identify the commercial property being leased. This part of the contract is complex, as different situations require distinct approaches. For instance, a business planning to occupy an entire building requires a different description than a company using a room or office within a larger building.
Accordingly, the best approach is to work with a commercial lease attorney to draft commercial lease agreements as close to perfection as possible.
There is no such thing as a commercial lease without the payment of rent. Hence, the document must provide in detail:
- How much is the monthly/annual rent?
- What are the expenses associated with the contract?
- How is the rent amount calculated? (e.g., per square foot, percentage of the business’s gross sales, etc.)
- Are there tenant improvement allowances?
- Does the contract establish common area expenses?
To be legally binding, a formal lease agreement must provide detailed rent clauses with full legal compliance.
The term clauses are crucial to any lease agreement, as it provides the set timeline for the lease from start to end. Any lack of attention or unintentional errors incurred at this part of the contract will heavily affect the outcome of the landlord-tenant relationship.
For example, some specific issues to be clarified include:
- How to specify when the business has commenced
- Whether the contract provides opt-out/bailout options
- Whether the contract contains a co-tenancy clause
Ultimately, handling all these term clauses correctly requires the guidance of an experienced commercial real estate attorney in Florida.
One of the core provisions of any commercial lease agreement, the elements associated with use clauses must provide a detailed description of how the premises will be used, such as the type of activities conducted by tenants, the type of products/services offered, and how the space will be used.
Step #3: Contact a Florida Attorney Specialized in Commercial Leases
In most cases involving commercial leases, contracts tend to favor landlords rather than tenants. Consequently, relying on the guidance of a well-versed real estate attorney who is familiar with commercial leasing is not only the recommendable approach – it is the only trusted way to protect your business’s interests.
In this context, an expert commercial lease attorney from Jurado and Associates, P.A. will help by:
- Negotiating the terms of the agreement
- Reviewing the language used in the lease
- Ensuring the agreement actually protects the client’s interest(s)
- Handling all required paperwork
- Guiding the client throughout the complications involved in the process.
Contact Us for Experienced Guidance on Commercial Leases in Florida
You do not need to expose your business and reputation to unnecessary risk. Whether you are a prospective landlord or a tenant to a commercial lease in Florida, waste no time with uncertainty. Contact Jurado and Associates, P.A. today by calling (305) 921-0976 or emailing [email protected].