Frequently Asked Questions About Commercial Real Estate
The attorneys of James & Waddle PC have more than 45 years of collective experience in real estate law, with a concentration in commercial real estate contracts.
Below are some common questions from clients. Please reach out to us to discuss your specific real estate matter. We practice in the San Diego area and assist with business and real estate matters across the border in Baja California, Mexico.
I am a first-time commercial lessee. How do commercial leases differ from residential leases?
Any lease is a binding contract, but commercial leases are much harder to break. As the lessee, you do not have the same legal protections that an apartment renter would have under California laws. While many residential leases are fairly standardized, commercial leases tend to be more customized.
For this reason, you need to pay extra attention to the fine print, which will most likely favor the property owner. The flip side is that you have some power in negotiating the terms of the lease. Landlords may be willing to make concessions and accommodations to rent the space to you.
What are the different types of commercial leases?
There are three main categories of commercial property leases, and it is important to understand the differences before you sign on the line.
Under a gross lease, everything is included in one payment (rent, taxes, insurance, utilities, maintenance). In a net lease, the lessee pays some of the property owner’s expenses in addition to rent. The most common type is the triple net lease, in which the tenant pays a percentage of the property taxes, insurance, and upkeep of common areas.
A third option, the modified gross lease, is a middle ground negotiation of what is and isn’t included. Always be clear about your obligations, even if the property owner calls it a “full service” lease.
What is the difference between a lease addendum and a lease amendment?
A lease addendum is similar to a “rider” on an insurance policy. It is a separate document, usually signed at the same time as the lease, that addresses specific matters, such as subleasing or alterations and renovations.
A lease amendment is a change to the terms of the main lease, such as length of the lease or right of first refusal. Property owners cannot simply impose an amendment after the fact of renting the space. Because it alters the underlying contract, it is not enforceable unless both parties agree to the amendment.
What are my options as a commercial landlord if my tenants say they cannot pay their rent?
If the tenant is still occupying the space, you can serve a written “Notice to Pay Rent or Quit.” The terms of the lease will dictate how many days they have to come up with the past due rent. If they do not respond or pay, you can commence an unlawful detainer action (eviction). If the tenant has abandoned the property, you can file a notice to take possession after 15 days.
The lessee is still on the hook for rent through the termination date of the lease (minus any rental income from a replacement tenant). California law allows landlords to apply the security deposit toward unpaid rent. If the deposit does not cover your losses, the unlawful retainer allows you to pursue the tenant for unpaid rent, plus court costs and legal expenses.
Do You Have A Commercial Lease Question?
James & Waddle PC represents both commercial landlords and commercial tenants, and we have experience in drafting, negotiating, and litigating commercial leases. Call our San Diego law office at 619-436-5024 to discuss our services or contact us online.
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