Commercial Lease Agreement PA: Everything You Need to Know
Pennsylvania offers plenty of commercial leasing space available, and knowing a commercial lease agreement is essential to keep your business running smoothly.3 min read
2. Commercial Leasing in Pennsylvania
What comprises a commercial lease agreement PA? Pennsylvania offers plenty of commercial leasing space available, and understanding a commercial lease agreement is essential to keeping your business running smoothly in a commercial property.
A commercial lease agreement typically offers more flexibility than a standard residential lease agreement. This allows both parties to meet their needs through negotiations. However, the increased flexibility comes with increased risk for those who are not adequately prepared or represented.
Understanding and avoiding common mistakes can prevent future disputes and protect both the landlord and the renter, especially in today's tough economic climate.
Important Commercial Lease Clauses
Commercial leases often place the cost of upkeep and utilities onto the renter. Although it might result in a lower monthly rent amount, this ultimately saves the landlord time and money. Charging building operating expenses and maintenance costs to the renter will lower expenses for the landlord over time.
Other terms to consider include rent increases (which typically increase by a predetermined percentage per year), security deposits, lease start/end dates, and the day that rent is due.
In general, the lengthier the term to which the tenant agrees, the greater the financial security and profit for the landlord. However, businesses do fail sometimes. High-earning and high-traffic tenants add value to commercial property and offer an incentive for landlords to secure long-term renters, but entering into a long-term lease agreement with a high-risk business is certainly not as valuable.
A few particularly important clauses to consider are:
- Use clause - This clause determines what the property may be used for. For example, a commercial lease agreement may state that the property may only be used for retail, restaurant, or warehousing. By limiting the commercial property's use, a landlord may find it easier to lease a similar space to a similar business without completing overhauling the property.
- Exclusivity clause - A tenant may request this clause if they are concerned about the landlord leasing a nearby space to a business that may compete with their own. For example, a retail shoe company may request an exclusivity clause to prevent the landlord from leasing a nearby space to another shoe store.
- Subletting and assigning - Subletting can be mutually beneficial for both tenant and landlord. Even if the original tenant can no longer afford rent, or is no longer in business, the landlord can still receive rent. However, the tenant should not be granted full discretion. Restricting or limiting a tenant's ability to sublet may protect the interests of the landlord and of the commercial property, as it may maintain the space in a way that's suitable to its intended purpose.
Commercial Leasing in Pennsylvania
There are numerous challenges that any tenant across the United States may encounter. Pennsylvania also presents its own unique challenges. The best way to avoid the challenges of commercial leasing is to educate yourself regarding potential pitfalls and roadblocks and develop a course of action to work around them if necessary.
Roughly 57 percent of townships and boroughs in Pennsylvania have their own zoning ordinances. As a result, commercial leasing may be complicated, and it may be difficult for a business to determine whether they are adhering to regulations regarding the permitted use of their lease. Sometimes municipal zoning regulations will utilize similar but different names for districts (e.g. Business General, Commercial General, and Business Commercial). On top of that, each zoning ordinance will vary when it comes to permitted use. Often, landlords will not take the time to warrant whether a commercial space is permitted for a particular use, and so this responsibility falls on the potential tenant.
Originally passed in 1999 and amended in 2004, the Pennsylvania Uniform Construction Code mandates a statewide building code. Similar to permitted use, each municipal corporation within Pennsylvania has the authority to determine whether they wish to utilize and enforce the Uniform Construction Code (UCC) within their own jurisdiction.
More than 90 percent of Pennsylvania's 2,562 municipal corporations have decided to enforce the UCC locally, either by using their own employees or by utilizing third-party agencies. In those municipalities that have opted out of using the UCC, the responsibility to enforce commercial codes falls onto the Department of Labor and Industry. Even though a statewide building code exists, each municipality varies greatly in its enforcement.
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