Understanding a commercial real estate lease

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A real estate broker can sell commercial properties, but it takes a certain expertise. A great deal of knowledge is necessary in financial matters, such as current loans available and rates. In order to secure a lease of a commercial property you must know the laws of the specific trade you are leasing for.

To illustrate such, I sold a commercial lease for a cigarette store with a cigar humidor.

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This is a room that is well sealed with pine or oak and the person can feel satisfied to smoke there. Securing the lease paid a commission of 6 percent which was acceptable, and the lease came to $1000 per month. The renters had to secure a second lien on their property.

So in order to lease the smoking store and spend approximately $100,000 on a humidor, they had to secure a note on their home. This is never advisable unless you are very secure in your finances and sure of the business. This man went bankrupt in his business. A better alternative would be to have signed a long term lease, at a higher rate of rent each month.

Accepting to do all the building and repairs placed a real burden on the tenant. Normally, if you secure a commercial lease, as in a restaurant, the owner of the building will guarantee the interior for 3 months or more. This is important for the heating and air conditioning. After the commencement of the lease, the building must be inspected and signed off, that everything is good shape.

A normal lease of a restaurant is 5-20 years. The longer the lease the better depending on your situation. If you are purchasing a secure business and your cash flow is sufficient, then sign a longer lease. Always, when purchasing a restaurant you want to put a clause in the purchase, that the owner may not own a similar business within ten miles of the business he is leaving. Also, you will want to write a clause about the employees.

With any business you will want to see a current profit and loss of the business. Understanding that the statement could be false and not true. A good way to check on money flow of a business is to sit outside the business and watch who comes and leaves. After watching customer flow, you should be able to see if the statement was correct.

If you are representing the tenant, then you must take an agency to protect him in all cases, so it is very important that you have experience in all legal matters. A large deposit is required for the escrow in excess of $5000. The deposit may or may not be refundable,

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