A business that leases real estate and improvements (buildings, etc.) in the form of space for offices, a warehouse, a restaurant, a nail or hair salon, a clothing store, a coffee shop, or other commercial (nonresidential) space will usually be required to sign a written contract known as a commercial lease agreement.

The tenant (the business occupying the space) who signs a commercial lease agreement is generally expected to be a more savvy, sophisticated, and informed tenant (also known as a lessee) than a tenant in a residential lease, and the law usually does not provide a commercial tenant with the same protections as residential tenant receives.

Because the law does not provide a commercial tenant with many protections, it is up to the commercial tenant to read, understand, and negotiate protections in a proposed lease agreement before signing it, as most every paragraph in a commercial lease agreement can have a significant impact on a business’s operations and financial stability.

Many commercial leases include a provision (paragraph or paragraphs) requiring the tenant to pay a security deposit to protect the landlord against damage to the property and to ensure the payment of at least some portion of the rent.

The security deposit provision should include the circumstances under which the landlord may be able to keep some or all of the security deposit following termination of the lease at the end of the lease term, or earlier termination, as provided by the agreement. The security deposit provision should also provide for the landlord’s obligation to return the security deposit to the tenant following termination of the lease when the landlord does not have the right to retain some or all of the security deposit.

In South Carolina, businesses entering into commercial lease agreements for various types of nonresidential spaces, such as offices, warehouses, or retail stores, are expected to engage in these transactions with a higher degree of knowledge and sophistication compared to residential tenants. South Carolina law does not afford commercial tenants the same level of statutory protections as residential tenants. Therefore, it is crucial for a commercial tenant to thoroughly review, understand, and negotiate the terms of a commercial lease agreement. This includes negotiating protections that align with their business needs and interests. A common element of these agreements is the security deposit provision, which outlines the conditions under which the landlord may retain the deposit for damages or unpaid rent, and the conditions for its return upon lease termination. Commercial tenants should ensure that the lease clearly defines these terms to avoid potential disputes. It is often advisable for a commercial tenant to consult with an attorney to navigate the complexities of commercial lease agreements and to advocate for favorable terms.