What to Know About Arizona Warehouse Leasing Before You Sign a Contract
As is true with any commercial real estate transaction, Arizona warehouse leasing is a serious undertaking. Both landlords and tenants are subject to various obligations and must abide by the terms in their lease agreements. There are unique provisions that apply to commercial properties as well.
Prospective tenants should also keep in mind that lease agreements are typically written to favor the landlord, so it can be a costly mistake to sign a contract before reviewing with an experienced Arizona commercial real estate attorney. It is wise to analyze the lease and ensure it is fair before signing, so read on to learn more.
This is what to know about Arizona warehouse leasing.
What Defines a Commercial Property in Arizona
Arizona state law defines commercial property as real property occupied for the sake of conducting business, rather than for residential purposes. This includes, but is not limited to, the following: office complexes, stores, meeting spaces, factories, farmland, parking structures and banquet halls. Warehouses are also considered commercial property.
Businesses operating out of commercial properties, with a few exceptions like those categorized under the transient lodging classification, are subject to business taxes. County and city transaction privilege taxes also apply.
Transaction Privilege Tax
The Arizona Transaction Privilege Tax is often referred to as sales tax, but it is actually a tax on vendors that gives them the ability (privilege) to operate within the state. A business operating out of a warehouse and subject to TPT must register with the Arizona Department of Revenue and obtain a business/occupational license from the city in which it operates.
The Arizona transaction privilege tax on commercial leases was reduced to zero in July 1997, but county taxes still apply. Five counties in Arizona—Coconino, Gila, Maricopa, Pima and Pinal—require commercial property owners to collect and remit county taxes for commercial leases.
Considerations When Leasing a Warehouse in Arizona
There are several online portals for Arizona warehouse leasing where property owners can list and businesses can browse open spaces. Before you sign a contract, though, be sure to consider these following features.
- Rent changes. There could be automatic rent increases or changes to the different components of monthly rent.
- Common area charges. The lease should specify which areas are shared and if these usage fees can increase over time.
- Lease extensions. Successful businesses understandably don’t want to move, so be sure the lease can be extended.
- Premises use and modifications. Are certain business types allowed to operate? Can tenants make changes to the property?
- Determine the type(s) of insurance each party is required to hold and how it will be paid for.
- Lease Amendments: Understand what lease amendments are allowed before you sign the contract.
Prospective tenants should also clarify who will maintain which parts of the property. This can be a substantial financial burden on any tenant in the event of a major repair or replacement. Additionally, ask if a personal guarantee is required. These can be negotiated to end after a set period of time or be capped at a specified amount.
Many disputes in Arizona warehouse leasing arise due to an issue described here, so it’s best to do due diligence before making any lasting decisions.
Find An Experienced Arizona Real Estate Attorney
MacQueen & Gottlieb has significant experience with navigating commercial real estate transactions in Arizona. Our firm can help you review your lease agreement, and we can assist you in negotiating the most favorable terms. Contact us today at (602) 726-2229 to schedule an initial consultation or make an appointment online.