Small Business Today Magazine SEP 2014 ELP ENTERPRISES | Page 29
EDITORIALFEATURE
it’s a free-standing building such as a McDonalds, wherein the
lease term may be for 20 years. Most landlords prefer 3 to
5 year leases and will usually provide options to renew at the
then current market rental rate.
4. Rental Rate – The rental rate is typically quoted as a price
per sq. ft. either on a monthly or annual basis. The rental rate
will be stated either as a gross rent or a net rent. A gross rent
means the tenant pays a fixed rental rate and the landlord
is responsible for paying all operating costs of the property.
Whereas a net rental rate is a base rate that provides the
rate of return required by the landlord and the tenant then
pays pro rata the property taxes, property insurance, and
property maintenance costs. This is often called a triple net
lease, because in addition to the base rent, the tenant pays
all the operating expenses of the property that include taxes,
insurance, and maintenance.
5. Use of the Property – All leases will address the allowable
use of the property and the restrictions thereof. It is import-
ant to review the uses and limitations of the property stated
in the lease. Some leases will be subject to use limitations
due to exclusive uses granted to other tenants. Some landlords may want to exclude the use of the facilities for businesses that may cause insurance costs to be high, personal
preferences such as businesses serving liquor or sexually oriented businesses, and businesses that would generate excess
traffic resulting in parking problems. Lease use limitations
can sometimes be negotiated with the landlord to allow a
specific use.
Before entering into a lease, always read the entire lease and if
you do not understand some of the lease terms hire an attorney
to help you understand the lease and make recommendations
on how to make the lease better for you and your business.
Jeff Jones is the President of Certified Appraisers, Inc. and Advanced Business Brokers, Inc. located at 10500 Northwest Freeway, Suite 200, Houston,TX 77092. He
can be contacted by phone at 713-680-3290 or by email at jdj@certifiedappraiser.
com.
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