While some business endeavors can be conducted completely from home, there are situations in which a business’s success depends on finding the perfect storefront. So what are the differences between renting a residential property and renting a commercial property- and what should you look for?
In many ways, you should look out for the same attributes you’d look for in a residential property- the space should be clean and well-maintained, you should take note of any pre-existing damage and ask the property owner to make repairs (using the same principles described in this article about residential rentals, and of course, you want a desirable location where you feel your business could thrive. We’ve discussed the importance of carefully and completely reading leases before you sign the contract- this concept definitely applies to both residential and commercial leases. Remember, there is no “standard” lease, so you cannot predict or assume the terms of the agreement.
Of course, the property will not be in a residential zoned area. Commercial spaces typically fall into the category of business park, industrial park, or commercial retail property. Which type of space you decide to move into depends on the type of business you are conducting. You will want to make sure your use of the property abides by local zoning ordinances. If neither you nor the landlord is sure your business is allowed to operate in the space, you should contact an experienced commercial real estate attorney and consult with the applicable city, county and/or state offices.
Often times, commercial lease terms are for longer periods of time – 5 year terms are commonly seen. Especially if your business is in its first stages, a long lease term may be risky. If the business fails and you close shop, you are still legally obligated to pay rent for the entire lease term.
Be aware of “Triple Net” leases and CAM fees. These types of lease terms are more common in commercial leases than residential leases. “Triple Net” leases mean the landlord asks the tenant to pay rent, property taxes, property insurance, and maintenance fees. The tenant is essentially completely maintaining the property financially, but receives no ownership rights. CAM fees are also commonly included as “additional rent due” in commercial lease terms. CAM stands for “Common Area Maintenance” and often means fees for gardeners, upkeep/cleaning of the property exterior, or trash pick-up. If the specific types of CAM charges aren’t explicitly listed in the lease terms, you should ask the landlord to add them with specificity so you aren’t surprised by the charges later.
If your business depends on the flow of visitors coming in and out (like a retail store or restaurant), there are other specific factors to consider. You want the property to be both visible and easy to access. Visibility means the store can be easily identified from the street. You’ll want consumers to see the property exterior and know what business is inside. There may be local ordinance restrictions regarding advertising and signage, so be aware of any rules before you move in. The building should also be easy to access. The parking situation may be a factor in certain areas. If there is no designated parking lot, you’ll want to be aware of street parking rules. A lack of parking availability may turn off potential customers.
As you can tell, there are many factors to consider when considering a business location—some legal and some non-legal.
For more information regarding starting your own business, please contact Richardson “Red” Griswold of Griswold Law at (858) 481-1300 or rgriswold@griswoldlawsandiego.com.
Griswold Law is always posting articles about concepts and issues involved with running a business. Be sure to check out the complete list of these articles!
