Businesses need to carefully consider the pros and cons of using a business lease for personal use. On one hand, it can provide needed flexibility and financial advantages. On the other hand, there are potential risks involved that could end up costing the business money.

This article will show you some tips to help you decide if using a business lease for personal use is right for your situation. When it comes to a commercial lease agreement, it should be all about the business. Using the property for personal purposes can open up the business entity to a host of potential problems. Here are some things to consider before using a business lease for personal use.

What to Do

Make sure the terms of the lease allow for personal use

Although most commercial leases contain a clause prohibiting personal use, there may be some wiggle room depending on the binding contract. If you’re unsure, have an attorney review the lease to see if personal use is allowed.

Get written CONTRACT from the landlord

Even if the terms of the lease allow for personal use, it’s important to get written permission from the landlord before using the property for anything other than business purposes. This will help protect you in case there are any problems down the road.

Moreover, you should always have a clear computation on the net lease and gross lease with the landlords. Property taxes should also be settled, as well as the schedule of lease payments during the lease period and maintenance costs.

A security deposit may be needed (and there should adequate be landlord insurance in place), but this will depend on the commercial landlords or property owner on how much they charge for the existing space and usable square feet.

Keep business and personal uses separate

If you do use the property for both business and personal purposes, it’s important to keep them completely separate. This means having two different entrances, two different phone numbers, and two different utilities. This will help prevent any confusion or mix-ups that could cause problems later on.

What Not to Do

Use the property for illegal purposes

This should go without saying, but using the property for any illegal purpose – personal or otherwise – can get you into a lot of trouble. Not only could you be arrested, but you could also be sued by the landlord or have your lease terminated.

Sublet the property without permission

If you want to sublet the property to someone else, even for a short period of time, you’ll need to get written permission from the landlord first. Most leases contain clauses prohibiting subleasing without prior approval, so it’s important to get the okay before moving forward.

Stop paying rent

Just because you’re using the property for personal purposes doesn’t mean you stop to pay rent. If you do, the landlord can evict you and sue you for any unpaid rent. Keep in mind that landlords are also doing business and earn from rental income, and it could lead to legal issues if you don’t pay according to your lease terms.

Differentiating Commercial Leases from Residential Leases

From the terms themselves “commercial” and “residential”, it’s pretty easy to tell that these two types of leases are meant for different purposes.

A commercial lease is a legally binding contract between a landlord and tenant for the use of commercial property, while a residential one is an agreement for the use of the residential space.

There are several key differences between commercial leasing space and residential leases that a business owner need to be aware of, such as:

Term Length

Commercial leases are typically longer than a residential property, with the average being 3-5 years. This gives businesses the stability and predictability they need to plan for the future. A residential lease, on the other hand, are usually only 1 year in length, or it depends on what you and the landlord agrees as well as the real estate attorney.

Rent

Commercial rental property is usually higher than residential rent because a commercial space is typically able to generate more income from the property. This is why it’s important for businesses to carefully consider their ability to afford the rent before signing a commercial lease.

Renewal Options

Commercial leases often have built-in renewal options that allow the tenant to extend the lease for an additional term, while a residential lease typically do not.

Bottom Line

Using a commercial lease for personal use can be a great way to save money on rent, but it’s important to make sure you understand the lease agreement and how other commercial leases typically work, also that you have the correct commercial property insurance or your landlord does.

Additionally, it’s important to keep business and personal uses separate to avoid any confusion or mix-ups down the road.