Understanding Commercial Rental Applications

Understanding Commercial Rental Applications

by Ronna L. DeLoe, Esq., December 2018

Finding the right place for your business can be far more difficult than simply filling out a commercial rental application form. While the process may seem intimidating, you can feel much more confident submitting your application if you know what to look for and have the proper information and paperwork ready to go.

Rental Application Forms

Landlords use commercial rental applications to decide if you're an ideal tenant, meaning someone who can pay the rent on time and who won't cause problems or damage to the building. Because there's more at stake, such as higher rental rates and tenant suitability, landlords ask more detailed questions on commercial applications than on residential ones.

A basic rental application form can include information that the landlord fills in, such as his name, address, how many square feet he's offering to rent, the cost per square foot, the amount of the security deposit, and when the lease commences. Keep in mind that you can negotiate many details in the lease, including rent and security deposit, especially if you hire a tenant's broker to help you. Most brokers won't cost you anything because the landlord who rents his property to you pays their fee.

Contents of a Rental Application Form

While the following types of information are the most commonly requested, each landlord's form may vary:

  • The name of your business, current business address, and how long you've been at that address
  • Previous landlords' names, addresses, contact information, and amount of rent
  • The nature of your business and how long you've been in operation
  • Your company's owners, as well as their contact information and Social Security and driver's license numbers
  • The length of the lease term you want
  • The bank your business uses, along with its phone number, address, and possibly your account numbers
  • Whether your company has ever breached a lease or failed to pay rent
  • Whether your company has ever been evicted or declared bankruptcy, and whether a prior landlord brought a lawsuit against it
  • Names of credit references for your company
  • Permission for the landlord to do a background check, with payment of a fee
  • Your company's balance sheet, income information, and business plan
  • Your signature and date

Lease Terms

When looking for the ideal commercial space, you want to get a short-term lease to make sure you like the area and that it's right for your business. If you get a lease of a few years or more, you risk being on the hook for paying rent even if your company can't afford it or if you need to move locations. Although you may be able to assign the lease in such situations, it's not always possible and is simply one more responsibility you have to take care of. A short-term lease means not having to deal with such issues.

Note that startup companies may find it more difficult to get a large space in a desirable commercial neighborhood. You might have to start in a small space and then move elsewhere as your company grows.

Negotiating and Reviewing a Commercial Lease

When negotiating the amount of space, keep in mind you're paying for usable space plus rentable space or common areas, such as hallways and bathrooms. Paying for the common areas should cost less than the actual usable space, so it's a good negotiating point.

Also be mindful that each lease is different, so read the fine print to make sure the landlord hasn't included language that could hurt you down the road.

Types of Commercial Leases

There are three different types of commercial rental leases:

Full-service lease. The rent for this type of lease includes everything—taxes, repair costs, maintenance fees, and utilities—so there are no surprises later on.

Net lease. There are several types of net leases, which differ in what expenses the tenant covers. While the rent is lower for the tenant in each case, the net lease still isn't as tenant-friendly as a full-service lease.

Modified-gross lease. With this type of lease, the landlord pays for maintenance and utilities, but you, as the tenant, are responsible for part of the property taxes and common area fees.

Make sure to view at least several properties before choosing one. Tenant's brokers can be extremely helpful because they know the market and what lease points are negotiable. If you need legal assistance with your commercial rental application, consider using an online service provider for guidance.