Commercial Rentals: Tips and Considerations

Renting space can represent one of the biggest expenses for an entrepreneur. So, it is important that the business owner take special care with the terms and conditions of the lease and even seek specialized advice.

Reynaldo Álvarez, director of the firm Álvarez & Asociados Abogados, states that, legally, “a lease is where a person called a landlord grants the use of a property to another person, called a tenant. In the commercial sphere, it is a property destined to house a business or commercial enterprise.” According to our specialist, the law that governs them is the Código Civil para el Estado de Jalisco (Civil Code for the State of Jalisco), where how to handle a commercial rental is explained in detail.

Basic Aspects to Consider 

“First of all, it is very important that the tenant makes sure that the property he is looking to rent has authorization from the municipality to be used for the business that he intends to put in that location. It is necessary to remember that not all premises are destined or were built to house all types of enterprises. While some businesses are restricted in certain areas, there are others that can start up without problems,” he explains.

Álvarez adds that, once the tenant is sure that the municipality can grant him the license to operate in that property, the next step is to make sure that he is dealing with the right person and that he has the capacity to permit the rental. “Sometimes, the deal is being made with the legal representative, the administrator or even the alleged owner, but if that person does not prove they have the right to rent it, frankly it will not do you any good, even if a contract has been signed. So, it is necessary to ask him to show the corresponding deed or property title. If he is a legal representative, ask him to show the power granted to rent.”

A third aspect to consider would be the history of the premises and what other businesses have been there before. “Sometimes, we see a very clean and good location, but it turns out that the previous tenant left, did not terminate, for example, the operating license, which often happens, and the new tenant, when going to process his license, finds that the place has charges or fines and/or there are unfulfilled obligations or municipal taxes due, and he cannot start his business until those payments are settled.”

Rights and Obligations of a Tenant

“The main right of the tenant is the tranquil, undisturbed and peaceful use of the premises to freely exercise his business. While he is fulfilling his obligations, he should not be disturbed. In addition, the premises must always be in satisfactory conditions for the use and purpose for which it was rented.”

Rights and Obligations of a Landlord

“The main right of the landlord is to be paid and that the tenant’s obligations are fulfilled on time and in the appropriate form. If, for example, the contract states that the rent is to be paid during the first five days of the month with a check, that is how it must be paid. Similarly, the landlord is obligated to keep the premises in optimal conditions for the tenant to continue operating his business without inconveniences.”

Information is Power

When asked about some basic tips to take into account when negotiating an effective contract for commercial premises, Álvarez was emphatic about collecting as much information as possible. “First, it is essential to know everything about the operation of your business in detail, and secondly, the more information you have regarding the space, the owner, the previous tenants and the place where it is located, the easier it will be to negotiate the rental price and/or make relevant decisions.”

Surround Yourself with Experts

Before concluding, Álvarez recommends always having the support of a professional team that ensures the development of any company. “Depending on the industry or sector, I recommend having an accountant, a lawyer and a business specialist—not necessarily working in the office, but as external consultants that can be called regarding any detail or question that may arise. In the case of lawyers, it is ideal to establish an employment relationship from the beginning, because when reviewing the concrete plans to be carried out, he will be in charge of analyzing certain information, examining the requirements and reviewing contracts to clarify the exact rights and obligations of those involved in a commercial rental, thus avoiding unpleasant surprises that can destabilize the business.”