Leasing commercial space for enterprise operation is one of the most expensive and the largest expense expanding in the business sector. In purchasing one, a person should consider its location, target group and opportunity costs incurred before buying the premise. There are three types of commercial lease real estates for business purposes namely gross, net, modified gross leases, and they are evaluated using two methods the net and gross method. For gross lease, most of the expenses are catered for by the landlord including taxes. In acquiring Gross rent a tenant concentrate on developing his business as the owner incurs all the maintenance responsibilities (Crobb 1).
The Modified gross lease is easier to maintain as there exists a compromise contract for both tenant and the landlord. Also, it's flexible as an agreement form is signed indicating the rules of the premise what is legal and illegal to sell in the business premise and most of them are registered by the Housing and Finance Companies under the Lands Commissions Act by the law (Warring 2). Triple net also is known as NNN lease is the most popular and most preferable lease for commercial purposes as the tenant pays all or part of the three ‘losses’ that is property tax, insurance, and business permit to run the premise on top of the monthly rent. It is landlord-tenant friendly as it is more transparent regarding communication and tenants can quickly evaluate their gross net income about the rent paid per month being having full responsibility for the building(Crobb 8).
As a tenant, the clauses I would want in the lease include lease term agreement statement as a crucial point depending on the length I would want my business to operate in the long run and can be renewed if possible at the end of the termination period. Another element should be sublease indicating flexibility allowing me to subject some parts of the office parts for another business to a different person or additional duty of my own. Furthermore, an exclusive clause must be included to protect the landlord from renting out other spaces on the property to a direct retailer selling the same products like mine such as a bookshop. Lastly, I will consider Co-tenancy agreement whereby I am protected from loss of potential customer if the property’s anchor tenant closes the business allowing me to terminate the lease if action is not taken within stipulated period (SBA 6).
In addition, right of the tenant determining my value on rights and obligations specified in the lease such as car parking for my customers, staffs, proper sanitations additional portioning and accessibility to the premise in order to trade profitably. Fixture and fit-outs should be explained in detail indicating installation of fitting fixtures and services and the person responsible for the fit-out cost before I start doing the business as this will d determine my negotiation agreement with the landlord on a month rent payment.
After a standard solution if arrived at I will have to make three net copies one for the owner, mine and a spare one kept in the office files for future reference in case a dispute arises will still under a duty. Lastly, are the legal costs as the business is a commercial one and is regulated by the Commercial Tenancy Agreement Act of 1985, protecting from the landlord as he cannot claim any other expense to me relating to obtaining any mortgagee’s consent to the lease and renewal, negotiation or extension of the contract among others (Government of Australia 2)
In conclusion, real estate financing is one trading activity currently developing a rapid growth with most buildings used as rental and commercial businesses to earn more income. It has also created more employment opportunities to the majority of the citizens as they start an enterprise as a small entrepreneur and enlarges the business with time into a retail shop. Finally, if a potential business owner wants to start a large commercial business activity, he requires a lawyer that deals with real estate matters. Having such a profession person will give him all the valid information on operations regarding larger commercial properties and its costs and the longer a person stays in the building, the more the cost advantage for buying the whole building increasing creating a competitive edge if he was a loyal tenant to the landlord.
Works Cited
Cobb Mark (2016).3 Different Types of Commercial Real Estate Leases. 42Floors.(https://42floors.com/edu/basics/types-of-commercial-real-estate-leases)
Eaton, D. (2015). Small Business Development Corporation. The government of Western Australia. ( https://www.smallbusiness.wa.gov.au/small-business-development- corporation-home-page/)
SBA(ND). Starting and Managing. Leasing Commercial space. U.S. Small Business Administration. (https://www.sba.gov/starting-business/choose-your-business-location- equipment/leasing-commercial-space)
Waring David (2014). Buying vs. Leasing Commercial Real Estate. FitSmallBusiness. http://fitsmallbusiness.com/buying-vs-leasing-commercial-real-estate/
