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Commercial Lease Application

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A commercial lease application contains information on an applicant seeking to rent non-residential space in addition to giving consent to the landlord to perform various background checks. The application serves as the first step a renter takes in having a new 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 legally binding form used to set the terms of a tenant’s commercial rental lease, including rent payments, term length, and other conditions.

What’s Covered

In overview, a commercial lease application covers the following components:

  1. Information on the landlord.
  2. The property in question.
  3. Detailed information on the applicant’s business.
  4. Information about the owner of the business.
  5. Guarantors of the lease (a person that will financially secure the lease.
  6. The rental history of the tenant.
  7. References (banks, creditors, etc.) that confirm the financial stability of the tenant.
  8. The revenue of the business.
  9. Current assets of the business.
  10. Liabilities of the company.
  11. Consent given to the landlord to run background checks on the tenant.

What can be Asked?

In regards to a tenant’s business, there is little that is off limits in regard 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 aspects that don’t correlate to whether the tenant will uphold to the requirements of the lease.

Warning Signs

If the landlord uncovers any of the following during the application process, they would be wise to 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 scenario is that they anticipate their business will grow so fast that they’ll need to relocate to a larger space. The second reason is that they’re not confident in the future of their company. And the third situation could be that the tenant is not confident that the space 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 (one) or more guarantor. In the event the tenant can’t make rent payments, 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 a major red flag. This signals that the tenant has had trouble paying their bills on time, holds a massive amount of debt, has declared bankruptcy, or has in some other way proved to be financial unstable.