You may be used to dealing with rental-related paperwork if you own residential investment real estate in Florida. Believe it or not, the level of detail in these documents is comparatively low. Federal, state and municipal regulations – not your lease agreement – often define most of the critical terms between you and your residential tenants.
Coming from this highly regulated area of the business, case-specific real estate contracts may seem like an extraordinary expense. However, this level of customization is quite common once you start looking at commercial tenants’ agreements with their landlords. Get a brief explanation of some factors involved in this shift.
The looser regulatory atmosphere is one of the major reasons your commercial lease agreements could be more complicated than your residential contracts. For example, some commercial lessees would want you to include specific clauses regarding material breach of lease rather than default to the rules in Chapter 83 of the Florida Statutes.
In a residential setting, there are relatively few variables you would have to worry about. The unit in question would serve the same purpose as many other, similar homes: It would likely be a safe place for your tenant to sleep, cook or spend time with family over a long term. A wider range of activity and more specific leaseholder requirements make your contracts with business tenants much more complicated.
Cash flow, long-term return and profit margin will probably be a major issue for both you and your tenant in a commercial setting. In terms of cash flow, it would probably be in your best interest to include clauses that could secure the highest likelihood of predictable rent payments. For maintaining a long-term margin, you may want to include rent-increase terms to secure the return of your investment through changing economic conditions, such as inflation.
Commercial rentals have the potential to grow the value of your real estate investment considerably. The key to success is often establishing all your expectations for the arrangement ahead of time in a legally compliant rental contract.