Starting a business can be one of the most exciting and lucrative decisions of a person’s life, but it can also be full of legal headaches if the entrepreneur is not fully prepared. One of the most crucial decisions that must be made before any business is started is the location of the company. As is true in residential real estate, “location location location” is just as important in a commercial situation. An up-and-coming business leader must also decide whether the company will own the space that it operates out of, or whether a lease situation is more appropriate. These issues, if not handled with care and with a full understanding of the law, can lead to costly litigation. It is better for the new business to be started on a strong foundation, both structurally and legally speaking.
Lease vs. Purchase
Some business owners argue that one of the best decisions a startup company can make is to own the space that will hold all the hopes, dreams, and hard work of the business. By owning the property, the company will not be left at the mercy of a landlord who may seek to rent the space to another company at some point in the future. Business news magazines are full of stories of successful companies that prospered in one location, only to fold after being forced to move by a landlord. Owning the building or office space within which the company thrives can help protect the company from future real estate scarcity and solidify its customer base within a locality while at the same time allowing the company to gain equity in the property itself. This is not without risk, however, as the overhead for purchasing a commercial property may involve much higher startup costs than a lease situation and limit the company’s mobility in the future.
What many leaders may not realize when they decide to lease a commercial property is that landlords are also businesspeople. They are seeking to be successful and see their investment (the property) provide them with steady income and profit. It is for this reason that companies that choose to lease space from another should be sure that their lease agreements are based in solid principles of contract law to ensure that any dispute over the terms of the lease will be resolved in a manner that was intended at the time of the lease signing. Hastily entering into a commercial lease situation is all too common as new entrepreneurs are eager to start the ‘nuts and bolts’ of their company.
After all, few business people would enter into a new business believing that it would not be a success. A thorough lease agreement, however, should take into account situations under which the lease agreement may be terminated. There are countless situations that occur in the business world in which it makes financial sense for a company to relocate to another location. Whether the decision to move is due to increased profits and expansion, or a need to downsize operations, leasing an office space should be done in a way that allows this change without undue financial hardship on the company.
Questions?
Regardless of whether you already own a successful business or are preparing to create one, call the law office of Garcia & Gurney for help with any commercial lease or purchase decision. Our attorneys have experience with commercial real estate transactions and can guide you through the process quickly while ensuring that your interests are fully protected.
