Commercial tenancy agreement - What you need to be aware of

If you have to sign a commercial lease for your business, you are taking on a huge responsibility. After all, every rental agreement represents a long-term, expensive commitment. That's why it's especially important to look carefully to avoid unpleasant surprises for yourself and your company. With the following tips, you are on the safe side.

What is different in a commercial lease than in a lease for private residential premises

Most of us have already been acquainted with a private tenancy agreement, but not all of us with commercial tenancy agreements. Therefore, it is important to be aware of the specifics of commercial leases:

Freedom of contract

Commercial tenancy agreements are not subject to the special restrictions that apply to private tenancy agreements. The legislator assumes that the contracting parties are "equally strong" and therefore do not need to be specially protected from each other, as is the case with a contract between a business and a private residential tenant.

Contracting parties

Contracting parties in commercial tenancy agreements are often partnerships or also legal entities.

Rent

The rent does not have to be a fixed monthly amount, but can also be linked to turnover. The landlord can set the rent independently of the local rent index.

Use of the rented property

In contrast to a residential lease, the purpose for which a commercial space is to be used is initially open: Practice, workshop, sales room, warehouse, office,... The "purpose of the contract" is freely agreed between the renting parties.

Extension of the rented property

Often commercial premises must be individually developed by the tenant - and dismantled again after the end of the lease. This should also be regulated in detail in the tenancy agreement.

Outdoor advertising

Businesses are interested in presenting themselves to the outside world: From company signs to illuminated advertising on the façade, everything is conceivable.

Time rental

While fixed-term contracts are rare in private tenancies for obvious reasons, they are common in commercial tenancies, often with an option to renew included in the contract. -

As you can see: There are many more things to consider, discuss, document and stipulate in the contract for a commercial lease than in the case of a normal private residential lease. The checklist below will help you with this.

Checklist for the commercial lease

1. designate contracting parties correctly

It sounds trivial, but it is very important: Both contracting parties (landlord and tenant) must be correctly designated.

  • Make sure that the company name is correct and complete, as entered in the commercial register.
  • In the case of owners' associations and partnerships, all parties involved must be named and sign the contract. Make a list of all parties involved with name, current address, date of birth and nationality.
  • Obtain a declaration of consent to the lease from these shareholders
  • Obtain copies of identity cards of those involved for documentation purposes

2. subject matter of the contract and rental purpose

To avoid objections from the landlord or neighbours later on, you should precisely record the subject matter of the contract and the rental purpose:

  • What all belongs to the rental property?
  • What is the rental property used for? How is it used? (Is there public traffic? Are noisy machines used? etc.)
  • Clarify which local regulations and restrictions are defined for commercial premises. (For example, there are cities where commercial use of residential premises is only permitted to a limited extent or not at all!)

3. lettering and outdoor advertising

In commercial real estate, company names appear in various places: Illuminated advertising in front of the building, orientation boards in the corridors, lettering on doorbells and letterboxes, elevator lettering, etc. Clarify how these signs will be organised and what costs will be incurred.

In many cases it is also possible to have your own outdoor advertising, for example a neon sign in front of the window. You should also clarify this before signing the contract and have the landlord's permission recorded in the contract.

  • What all belongs to the rental property?
  • What is the rental property used for? How is it used? (Is there public traffic? Are noisy machines used? etc.)
  • Clarify which local regulations and restrictions are defined for commercial premises. (For example, there are cities where commercial use of residential premises is only permitted to a limited extent or not at all!)

4. rent

As mentioned, a turnover-based rent is sometimes possible instead of a fixed rent. This is especially interesting for businesses with public traffic (gastronomy, retail trade, etc.) if it is not yet clear how well the business will do at the new location. However, it must be remembered that in the case of a turnover-based rent, the landlord has the right to demand information about the turnover.

5. contract term and period of notice

The term of the contract can be freely determined. As a rule, commercial leases are concluded for a fixed term. This is because few companies can predict exactly what their rental needs will be in five years' time - some are happy to look over a quarter!

Important: Try to include an option clause in the contract that entitles you to extend the rent after the expiry of the rental period.

6. documents

The following data and documents are often required for the conclusion of a commercial lease:

  • Extract from the commercial register and business registration
  • Tax number or VAT identification number
  • Proof of liability for turnover tax
  • Copies of the shareholders' or managing directors' identity cards
  • Contact details of tenant representatives (address, emergency number, etc.)
  • Annual accounts of the company
  • Insurance certificate of the business liability insurance (with cover for tenant's damage) and the insurance of the business content
  • Evidence of current loans and other financial obligations
  • Depending on the landlord: Self-disclosure according to form; previous tenant confirmation, etc.

7. after conclusion of the contract: smart contract management

Once you have successfully concluded a contract, you should not simply file the contract documents in a folder and delete them from your memory. Why not? If you later want to terminate or extend the tenancy, you have to meet the relevant deadlines. And if you miss these deadlines, your plans will burst like bubbles.

It is therefore a good idea to entrust the tenancy agreement, together with all the associated documentation, to a contemporary Contract management software management software. For example ContractHero. This software shows you all your contract obligations and notice periods at a glance. And because it's really fun to look at the dashboard, you'll never miss an important deadline.

That is good for you and good for your company.

Sebastian Wengryn
CEO

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