Looking to invest in real estate? Tulsa, Oklahoma is perhaps the best place. Real Estate expert Sean Bryant recommends it after 9% annual growth in its property market.
Yet when leasing commercial properties in Tulsa, commercial lease agreements can trip you up. Unlike residential contracts, these are dense packets of legalese. How can one even come to understand a commercial lease?
Today, we demystify these leases. We'll examine common trip-ups like:
- Commercial lease lengths
- How rent works
- Usage restrictions
Here is your commercial lease guide in Tulsa. Follow along as we make complex commercial leases simpler.
Understand Commercial Lease Agreement Lengths
The best point of comparison for a commercial lease is a residential one. The first big difference between the two is how long the lease lasts. Commercial leases, almost always, last many years longer.
On average, a commercial lease can go from 3 to 5 years. They can go longer, too, with some leases lasting a decade. Such long terms have impacts on how you conduct business.
For example, take how the pandemic emptied office buildings. Many of these businesses still had to adhere to their commercial lease agreements regardless. Unlike residential properties, these businesses couldn't just wait until the end of a one-year lease and leave.
Rent for Commercial Properties
Another quirk of commercial leases is how they do rent. With residential properties, rent is a fixed amount every month for the duration of the contract. However, a commercial lease usually breaks it up into several components:
- Base rent
- Percentage of property taxes
- Percentage of property insurance
- Percentage of maintenance costs
- Percentage of gross sales
Not all of these elements are present in every commercial lease. Still, it's uncommon for commercial rent to be a lump sum. There are almost always additional percentages for building upkeep, security, and insurance.
Use Restrictions for Buildings
In residential buildings, the contract limits usage to residential purposes, i.e. living. In commercial properties, there is a "permitted use" clause. In other words, you can only use the building to do business activities, and nothing else.
There may also be limitations on what type of business is allowed. So, suppose you have a clothing store. Using the space to sell food (like a restaurant) could well be disallowed in the contract.
Exclusive Use Clause
There may also be an "exclusive use" clause. Such a stipulation would prevent your landlord from leasing space in the same area to your competitors.
Prohibited Use Clause
Finally, there may also be a "prohibited use" clause that strictly forbids certain activities. So, imagine you are doing something that would appear to be business-related, like storing flammable cooking materials. Prohibited use would forbid you from doing so even though those materials are directly related to how you conduct business.
Get Help with Commercial Lease Agreements
With these Tulsa property leasing tips, you're one step closer to understanding commercial leases. Commercial lease agreements tend to be longer and have a different method of extracting rent. Importantly, they strictly limit what you can and cannot do on the premises.
PMI Green Country in Tulsa is your source for excellent property management. Our customers give us glowing, five-star testimonials for our comprehensive, expert assistance. Start things off right with a free rental analysis.
