A commercial lease application provides a landlord with personal information and consent from an applicant seeking to rent non-residential space. The application serves as the first step a renter takes in having a new (or first) physical location for their business. Unlike a residential application, the landlord’s focus is more on the financial stability of the company instead of the individual themselves, as a successful business almost always translates into a worthwhile tenant.
Commercial lease agreement – a form used for legally binding a tenant to paying rent for a fixed period of time, in exchange for the right to work out of the space.
In overview, a commercial lease application covers:
- Who the landlord is;
- The property at stake;
- Detailed information on the applicant’s business;
- Who the tenant(s) is/are;
- Guarantors of the lease (a person that will financially secure the lease);
- The rental history of the tenant(s);
- References that point to the financial stability/availability of the tenant;
- The revenue of the business;
- Current assets of the business;
- Liabilities of the company;
- Banking references (for confirming the company’s financial standing); and
- Consent for the landlord to run background checks on the tenant(s)
What can be Asked?
In regards to a tenant’s business, there is little that is off-limits as to what a landlord can ask. However, when screening the individual applicant, there are certain types of information that are completely off-limits. This can include the applicant’s nationality, religious affiliation, gender, sexual orientation, age, and other qualities that don’t correlate to whether the tenant will uphold to the requirements of the lease.
If the landlord uncovers any of the following during the application process, they should either deny (or heavily consider) rejecting the applicant.
1. Not Willing to Sign a Long-term Lease
There are three (3) common reasons a tenant would be cautious about signing a lease for 5 to 10 years. The first (and more positive) scenario is that they anticipate their business will grow so fast that they’ll need to relocate to a larger space. A second (and dangerous) potential cause is that they’re not confident in the future of their company for one reason or another. A third reason could be that the tenant is not confident in that the space is exactly what will suit their needs.
2. No Financial Backing
Unless the main tenant is exceptionally wealthy, landlords should avoid leasing to tenants that aren’t willing to provide 1 or more guarantor(s). In the event the tenant can’t make the rent, the landlord would have to pursue the due funds via formal eviction proceedings.
3. Low Credit Score
A low credit score (<600) should be considered as a major red flag. This signals that the tenant has had trouble paying their bills on time, holds a massive amount of debt, declared bankruptcy, and/or other potentially foretelling signs.