What Type of Lease is Best for my Business?
- Author Chris Hunter
- Published July 21, 2011
- Word count 705
One should know the definition of the word "lease" before entering into one for Dallas office space. In layman’s terms, it is a legal agreement that must be agreed upon by the landlord and the lessee when planning to rent a new office space. This provides specific conditions and grants certain rights to the tenant and the landlord. It also includes the regulations and obligations that the landlord and the lessee are bound to perform.
The length of time set aside by the document may be short-term or long-term in duration and it ceases automatically when the established length of time expires. In order to choose the best lease for a company, it is necessary to know both the advantages and disadvantages of the document that will significantly impact the business’ operation.
Short-Term
Short term leases are most commonly executed for three to five years but can last up to ten years depending on the agreement between the proprietor and the tenant. This is ideal for those who just set up their business and are planning to grow rapidly.
Advantages:
• Flexibility - It is more flexible if there is a need to transfer to a more spacious place. The business is not tied down to an agreement for an extended period of time that could hinder growth. It can easily upgrade to a better, more current space.
• No Need for Attorney - There is no actual need to get a corporate lawyer since there are no complicated legalities that need to be addressed, although one can still be consulted if either party so desires.
Disadvantages:
• Higher Rent Potential - The tenant will most likely pay higher leasing costs.
• Rent Can Increase - The landlord can easily increase the leasing cost more frequently.
• Eviction Without Choice - The landlord may have the right to evict someone without the recourse of a legal process.
Long-Term
Of course, long-term leases are relevant for a longer stretch of time. This is better for well-established businesses that would like to spend as little as possible for the rental cost. The benefit of entering into this lengthy agreement is to acquire the space for a specified cost over a long period of time.
Advantages:
• Save Money - It is an affordable office space for a pre-determined period of time and landlords are usually willing to provide more concessions. For a long-term lease, the tenant can save money.
• Eliminate Rental Increase - Budgeting is simple since the landlord cannot increase the leasing cost if the tenant is within the coverage of the present agreement; the tenant must be notified if the landlord has the intention of raising the rent.
Disadvantages:
• Little Flexibility - It does not have much flexibility for both tenant and landlord as compared to a short-term lease agreement.
• Must Pay Rental Increases - The tenant must pay the annual increases in monthly rent. The periodic increase is intended to compensate for increases in insurance, taxes, repairs and maintenance.
Categories for Commercial Lease Agreements
• Flat – The tenant will pay a fixed amount during a specified period of time. Equal payments are given monthly during the entire period covered by the lease.
• Step – An agreement that allows the increase or decrease of the amount of office rent during the duration of the lease.
• Net – The tenant will pay, in addition to office rental, some other expenses such as property taxes, repairs and maintenance as well as the utilities.
• Gross – The landlord pays for the taxes, insurance and maintenance as well as collecting the rent and paying the expenses out of it.
Whether a business chooses a long-term or short-term commercial leasing agreement, it is vital that the agreement delineates the terms and conditions in detail as well as the obligations of the tenant and the landlord. Both types of leasing options have their individual advantages and disadvantages and it is up to the company owner to choose the lease best-suited for their business needs. If a company owner is unsure of which lease is the right one for them, a professional property agent can help them choose exactly what is needed for their business interests. Then a tenant business will be sure to find the right lease for the company!
C. Michael Hunter is an expert in commercial real estate and office space information. To find out more about Dallas Office Space, go to the main website at: http://www.lcrgusa.com/.
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