Business leasing is a popular and common practice for many companies. While it may be new to street vendors and small entrepreneurs, it is important to understand how it works, especially when upgrading from informal trading to a formal business premises.
A business lease is a legal document that allows a company or individual to operate a business in a premises owned by someone else (called the landlord). Remember that a landlord is also a businessperson whose main goal is to make a profit based on supply and demand.
Leases can vary in duration and cost, but they commonly run for three to five years and require monthly payments. A good lease agreement should clearly state the method and dates of payment, insurance requirements, any selling restrictions, and permitted hours of operation.
When reviewing a lease agreement, use a pencil to mark or circle any sections you do not fully understand. Then have them explained by an independent expert — most professionals strongly recommend hiring an attorney before signing.
Important Advice Before Signing a Lease
- Have the premises thoroughly inspected by a licensed building inspector.
- Check local demographics to confirm they match your target customer base.
- Contact the city or town council (not the landlord) to find out if any major construction, renovations, demolitions, or other projects are planned near the property in the future.
- Beware of lease clauses that allow the landlord to increase rent based on a percentage of your business profits.
- Ensure the lease includes an option to renew. This gives you the right (but not the obligation) to continue operating at a pre-agreed price when the original lease expires.
- Clearly determine what the landlord is responsible for.
- A turnkey lease includes fixtures, fittings, flooring, lighting, partitions, and maintenance (usually at a higher monthly rent).
- A basic lease may provide only empty floor space, meaning you will bear all setup and renovation costs.
- Confirm whether the premises can be used for other business purposes. This prevents legal problems if you later want to change or expand your business activities.
Final Thoughts
If you are planning to establish a business in a place you do not own, you must choose a location with a lease you can comfortably afford. Signing a lease is a major commitment, so take time to understand all terms and seek professional advice before putting your signature on any agreement.