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Common Clauses in Commercial Leases

by | Feb 23, 2022 | Real Estate |

What is a commercial lease? Commercial leases are designed to clearly establish each party’s rights and responsibilities. Most commercial leases in Texas are proposed and drafted by the property owner. Because there is no standard format for a commercial lease, the seller or buyer is often slightly benefited depending on who drafted the document.

How can you make sure neither party is at a disadvantage? Through the negotiating and drafting of the lease, it is important for both parties to communicate their needs. It is much easier for a buyer to express their expectations at the beginning of the process than to amend the drafted lease. If both parties are agreeable on the terms and conditions of the lease, the buyer may offer a letter of intent to the seller.

It is important to note common clauses that may appear in commercial leases. Some leases may have certain limitations that restrict the use of the land which may require the buyer to provide more money to lift the limitation or to fulfill an obligation.

Financing clauses may affect the buyer’s ability to obtain financing to purchase the property from the seller. The offer on the property may need a clause that permits the seller to void the lease if the financing is not obtained in its entirety. The buyer may require certain terms to be declared so that they are not forced into the lease with unfair rates that make the deal a bad idea.

Zoning and use of land clauses may affect how the property is used. The property may be purchased under the impression that the buyer will use the area as needed for possible revenue or personal accommodations. This means that there should be a contingency clause that permits the buyer to use the land as he or she intended, even if there is a change from the current usage. This may require additional permits or approvals.

Clauses regarding environmental conditions may affect the property. It is important to have a clause regarding hazards on the land to prevent the current or future use of the property from becoming dangerous. Examples of such may include hazardous chemicals or gas pockets found in the land. This can be prevented through contingencies that require environmental reports related to the property.

There should also be a clause regarding an inspection period of the property. This would allow the buyer to make an adequate assessment of the land and ensure it is fit for their intended usage. After the assessment, there may be needed repairs and upgrades. The contract should allow the buyer to exit the deal if the inspection is not up to standard.

Before completing the transaction, it is important for buyers and sellers to determine if the deal is beneficial for both parties. Our board-certified real estate attorney may assist your negotiating and drafting process to ensure the best possible outcome for everyone involved. Please call us at 713-572-4900.

 

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