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In a previous blog post, we provided an introduction into some keys points that you need to consider when entering into a commercial lease as a tenant.

In this blog post, we will go into a bit more detail about some of those items.

Indemnifier:

If you are renting the leased premises under a corporation name, chances are the Landlord will likely require you to be an indemnifier on behalf of the Tenant Corporation. This is essentially similar to being a guarantor on behalf of the main entity. So, if the Tenant Corporation defaults on any payments for the lease or is in violation of any other terms of the lease, the Landlord reserves the right to hold the Indemnifier equally as responsible as the Tenant Corporation.

Additional Rent vs. Base Rent:

It is vital to discuss with the Landlord if the type of lease you are entering into is a net lease or a gross lease. Depending on the answer, all you might be paying the Landlord per month is the Base Rent plus applicable taxes. However, in most commercial leases, landlords usually charge Additional Rent for a tenant’s proportionate share of property expenses (taxes; maintenance; insurance etc.) beyond the monthly Base Rent. If the amount of Additional Rent and what it actually covers is not negotiated correctly prior to signing the lease, this can add up to a lot by the end of the lease term.

Tenant Work vs Landlord Work:

You will likely be renting the leased premises for a specific purpose. For example, a fitness studio. However, the previous tenant may have been using it for a dine-in restaurant. As such, it is very likely that a few renovations and repairs will be required for the leased premises prior to you opening up the leased premises for business. Sometimes, as an incentive for entering into a lease, landlords may be willing to cover certain costs of such renovations as an inducement or be willing to take care of some of the required work on their own accord. Make sure to discuss who will be in charge of specific renovations and repairs prior to executing the lease.

Prior to signing any commercial lease agreement, it is essential to have it reviewed by a lawyer who is well versed in commercial tenancies.

Be on the lookout for a future blog post which will cover in further detail, some of the other key items that are important in a commercial lease.

For more information about this topic, please feel free to contact one of our lawyers! Email us at info@kormans.ca or call (905) 270-6660.

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Taimoor Qureshi is an Associate Lawyer at Kormans LLP. You can reach Taimoor anytime at tqureshi@kormans.ca.

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