How would a startup go about Leasing a Commercial Property?
There are a number of challenges a Startup may encounter when leasing a commercial property.
This may include leasing office space, industrial space, retail space.
The main reason is that a Startup does not have established credit, not a Covenant.
Covenant is not strong enough to be of merit in a leasing contract.
The Landlord may not necessarily decline the potential tenant but rather ask for a personal guarantee of the shareholder(s) or a letter of credit, or a security deposit in addition to the first and last month’s rent.
It is very important to fully understand the responsibilities the shareholders or directors will be accepting.
Prior to signing an offer to lease or the landlord’s lease, it is crucial that the Tenant’s of the Startup
Consult with their legal representative for an opinion and understand the responsibilities they and the corporation and they personally will be undertaking.
Flexible Approach and understanding a commercial real estate leasing contract is therefore very important.
Allen Mayer, Commercial Real Estate Broker