Commercial Leases for California Restaurant Owners 101

As a California restaurant owner, one of the most important decisions you'll make is choosing the location of your restaurant. But once you've found that perfect spot, your job isn't done. Navigating the complex world of commercial leases is the next step, and understanding the key elements of a commercial lease is crucial for your restaurant's success.

 Understanding Commercial Leases 

In its simplest form, a commercial lease is an agreement between a landlord (the lessor) and a tenant (the lessee) for the rental of property for business purposes. Commercial leases are different from residential leases in several ways. Not only are they typically longer in duration (often a minimum of 5 years), but they also provide less legal protection for the tenant. Because of this, understanding the terms and conditions of your lease is critical. 

Negotiating Your Lease 

Before signing a lease, it's important to understand that almost everything is negotiable. Key terms that may be negotiated include rent amount, duration of the lease, renewal options, permitted uses of the property, and who is responsible for maintenance and repairs.

 In California, a "percentage lease" is common in restaurant leases. This type of lease involves a base rent, plus a percentage of your gross income once your sales reach a certain threshold. If your landlord proposes this kind of lease, be sure to understand what percentage of sales will be used, and how "gross sales" is defined.

 Lease Provisions 

There are several common provisions found in commercial leases. These include the term of the lease, the amount of rent and how it will increase over time (often referred to as "escalation"), the security deposit, responsibility for repairs and maintenance, insurance requirements, and clauses dealing with lease termination.

 Additionally, California restaurant owners need to be aware of specific clauses like exclusivity clauses, which prevent the landlord from renting to another similar business in the same building or complex. Another crucial clause to consider is a "continuous operation" clause that might require your restaurant to be open for business at certain times.

 Legal Considerations 

California law offers certain protections for commercial tenants. For example, the law requires landlords to deal with tenants in good faith and not to interfere with the tenant's peaceful enjoyment of the property. California also has specific laws concerning security deposits for commercial rentals. Familiarize yourself with these protections to ensure your rights as a tenant are upheld. 

Conclusion 

A commercial lease is one of the most significant commitments a restaurant owner will make. As such, it's vital to read the lease carefully, understand its terms, and negotiate for conditions that are favorable to your business. While this blog post is a starting point, it's strongly recommended to consult with an attorney before signing a lease. This can help ensure that your interests are adequately protected and that your restaurant has a solid foundation for success.

Disclaimer: This blog post is intended for informational purposes only and does not constitute legal advice. Always consult with a qualified attorney for any legal decisions.