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5 Responsibilities to Consider Before Leasing Your Commercial Property

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Being a commercial landlord can potentially be a highly profitable means of passive income. There are many benefits to leasing commercial property as opposed to residential, including more lucrative rental agreements, longer lease terms, site renovations and repairs made by the tenant. However, renting out your commercial property does come with a distinct set of responsibilities that you should fully understand before committing to it.


Here are five significant responsibilities to examine before becoming a commercial landlord:


Creating a precise lease agreement detailing precisely what the landlord and the tenant will be responsible for.

A detailed lease, written with the help of an attorney, is the wisest way to protect your investment legally and financially from the outset. Your lease agreement should include but is not limited to, proper and prohibited use of the property, tenant obligations for maintenance, tenant requirements for property and business insurance, the conditions and consequences of default, a personal guaranty, and terms if the property is sold during the lease term.


Obtaining proper commercial property insurance for damages and losses, as well as liability.


Not only is commercial insurance coverage required for landlords by state laws, but it's also essential to protect your investment. Your insurance should cover losses or damage to the building and equipment inside, and you might also consider a Lessor's Risk Insurance policy to cover theft, vandalism, and injuries incurred on your property.


Staying up to date with current building codes and standards of safety.


Initially, it might seem costly and time-consuming to stay on top of ever-changing property codes and industrial technology. However, in the long run being up to date with current codes and technology can save you money on heating, cooling, electricity, and, ultimately, building maintenance. Additionally, tenants working in a healthier environment are happier thus resulting in “green” properties having high market demand.


Repairing structural damages that fall outside of the tenant's responsibility as outlined in the lease.

Though your lease agreement should detail exactly what the landlord and the tenant each will be responsible for repairing, most often major repairs that aren't due to tenant misuse will be the landlord's responsibility. A partial list includes maintaining the building structure, painting, roof repair, elevator maintenance, and parking lot repair.


Maintaining and repairing major appliances.


In addition to keeping up to date with building codes, safety, and structural maintenance, the landlord is responsible for the installation, repairs, and service of major appliances including the HVAC unit. Regular maintenance and servicing of HVAC systems in the building may not only prevent more expensive fixes later on; it will make your tenants satisfied long-term renters.


Commercial property is a wise investment and becoming a commercial landlord is a smart way to create long-term, passive income. However, it's essential to adequately prepare legally and financially for the additional responsibilities that come with leasing commercial space to reap the financial benefits down the road.