Signing a Commercial Lease

Why Entrepreneurs Should Lease Space

Written by Samuel Muriithi for Gaebler Ventures

To many entrepreneurs the leasing option is far much more practical than the decision to buy a property. This is especially so for businesses at the start-up stage which is bedecked by all manner of expenses. What do real property lease agreements involve?

There are four categories of leases that apply to business properties as follows:

Tenancy for years

This type of lease features a fixed term that may be a specified time period of weeks, months or years. The lease structure allows for the options to renew or to purchase. The tenancy for years lease is suitable for entrepreneurs who have the desire to purchase a facility that is deemed to be an ideal permanent location for the business.

Periodic tenancy

The month-to-month lease structure is the most common type of a periodic tenancy lease agreement. Prior to the cancellation of this lease a designated period of notice must expire.

Tenancy at sufferance

There are two possible options that may ensue once a tenancy at sufferance lease expires. The landlord may decide to eject the tenant. Alternatively he may decide to continue receiving lease payments in which case a new periodic tenancy comes into effect. However, the timeframe for the new lease remains the same as in the previous lease agreement.

Tenancy at will

In this lease agreement neither the rent amount nor the tenancy duration period is documented. This agreement allows for alteration or termination at any time and by either party.

Under an ordinary lease agreement both parties, i.e. the landlord and the tenant, have designated rights and duties. The landlord is allowed the right to receive rent. In some cases he is allowed to retain any fixtures that are added to the property granted that he undertakes the duties to pay property taxes and to maintain the facility. The lease agreement allows a landlord to sue a tenant for unpaid rent and/or evict the tenant from the facility.

On the other hand, the tenant is allowed the possession and use of the facility granted that he pays rents and maintains the property in a good condition. Some lease agreements allow tenants to sublet or assign the property to a third party. Whatever the options provided to the tenant are, he or she as the entrepreneur must ensure that the corresponding terms are clearly spelt out in the lease agreement.

Samuel Muriithi is a business owner in Nairobi, Kenya. He has extensive international business experience in the United States and India.

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