WHAT’S IN A NAME?

So you’ve formed your company by filing Articles of Incorporation or Articles of Organization with the Maryland State Department of Assessments and Taxation. SDAT has determined that the name you have chosen is available.  That means that you own that name and have trademark rights in it, right?

Wrong.

All it means is that there is not another corporation or limited liability company registered in Maryland that has the same or very similar name.  It does not ensure you are not infringing on someone else’s intellectual property (trademark), nor does it provide much protection to you in such property.

Interested in trademark protection?  Registering your entity with SDAT won’t do it.

At a basic level, there are two issues you should know about when it comes to trademarks:

1.   You want to make sure you do not infringe on someone else’s intellectual property rights to the trademark; and

2.   You want to protect your intellectual property rights to the trademark.

You want to avoid spending a chunk of money to develop wide recognition of your mark, only to find that you have to stop using it because someone else had it first and took the appropriate steps to protect it.

Before you register your entity and spend considerable marketing dollars making the name a valuable asset to you, you should do a search to see if anyone is using the same or a similar name.  At the very least, this should involve internet search and a search of the U.S. Patent and Trademark Office website (www.uspto.gov).  A search firm specializing in such searches will go more in depth on this than you can, and is recommended in many situations.  Such a search will reveal whether there are existing marks which may conflict with or prevent you from registering your mark at the Federal level.

While there are various levels of trademark protection, the best protection is Federal registration of the mark on the USPTO’s principal register.  In order to obtain such registration, you must file an application with the USPTO.  You can file the application online.  However, there are numerous requirements and details matter, such as an accurate description of the goods and services covered, so you might want to consult with an attorney to help you.

Once the application is filed, expect to wait months before it is assigned to a USPTO examining agent.  The USPTO will then do its own search to see if there are any existing marks or applications which might conflict with yours.

Even if there are no conflicting marks, they will determine whether there are any other barriers to registration (for example, the mark is too generic or is merely descriptive, among other reasons).  If your application passes those tests, it will be published for opposition.  For a period of time, anyone who thinks your mark might conflict with theirs can object to your mark obtaining federal trademark registration.

If someone objects, your application may be suspended while the USPTO determines the merits of such objection.  If there are no objections, the USPTO will issue your registration, and you will receive a lovely certificate.

Important: you can put the world on notice that you claim common law trademark rights in your mark by placing a “TM” next to your mark wherever you use it.  You can use that symbol as soon as you start using the mark.  This may provide some protection, but not as much as Federal registration.

You may not use the (R) symbol next to your mark, however, unless the USPTO has granted you federal registration.

ODDS AND ENDS

This is the 6th and final Part of a series of articles about leasing commercial space for your business. In the previous installment, we explored rent. We found out there is more to rent than one might originally think. Today we talk about assignment and subletting, alterations, remedies and my favorite – the roles of the real estate broker and attorney.

ASSIGNMENT & SUBLETTING

Almost every lease contains restrictions on assignment (transferring your lease to a third party). As a tenant, you want to make sure those restrictions do not present unreasonable barriers to implementing your exit strategy from your business. For example, if you plan to sell your business during the term of your lease, you want the landlord to accept your purchaser as the assignee. Does the landlord have the right to withhold consent in its absolute discretion? Or does the lease provide the landlord cannot unreasonably withhold its consent? The language could mean the difference between your business sale going through and failing. Also, depending on the language in the lease, it might make a difference if you sell assets, as opposed to your corporation’s stock.

ALTERATIONS

In addition to provisions addressing initial build-outs, lease agreements generally prohibit alterations without the landlord’s written consent. If you anticipate needing changes to the premises in the future, include language in the lease whereby the landlord consents to such alterations. Be as specific as possible.

REMEDIES

Every lease affords the landlord remedies. It is only fair that if the tenant does not uphold its end of the bargain, the landlord should be able to recover its damages, as well as possession of the property. The key to remedies for the tenant is to make sure they are reasonable. You want some opportunity to cure defaults (which include more than just the failure to pay rent on time). In addition, pay attention to what the lease provides as far as landlord liens. If you plan on obtaining a business loan, make sure the landlord’s remedies would not interfere with your ability to grant your lender a first priority security interest in your assets (which the lender will require).

RULES & REGULATIONS

Sometimes leases include comprehensive rules and regulations. These can range from not permitting noxious odors to emanate from your space, to dictating where you place your trash. Check to see if they would unreasonably inhibit your business.

ROLES OF REAL ESTATE BROKER & ATTORNEY

Real estate brokers and agents know the local market, can help find suitable available space for you, save you from paying too much and help negotiate major lease terms. Residential and commercial real estate are two different animals. Make sure you work with an agent who has experience in and knows the commercial market.

After determining your business’ circumstances and goals, an attorney will draft or review, as well as negotiate, the lease agreement to make sure it meets your needs. The attorney will also educate you on the meanings and consequences of the various lease provisions, and help protect your interests. Sometimes it is what the lease omits, rather than what it includes, that can represent the biggest challenges for you. While you make the final decision as to what is and what is not acceptable in your lease, an attorney will help you make the best educated decisions possible.

Typically, the landlord pays your broker’s commission. You will be solely responsible for compensating your attorney. You should consider your attorneys’ fees as an investment, rather than an expense. A modest investment now could save you a lot of pain and money later. In other words, look at the value your attorney provides to you, rather than just the dollar amount paid.

I have discussed quite a few topics in this series of articles. I hope I have opened your eyes as to the potential advantages and pitfalls you can face when entering a commercial lease. However, I have only touched the tip of the commercial lease iceberg.

I would be happy to assist you in finding commercial space and negotiating a fair lease which meets your needs. Call or email me today so that I can assist you in finding the right commercial space with a fair lease that meets your needs. You can reach me at 410-544-2931 or hedy@hedynelson.com. I look forward to working on your behalf.

How well do you know your lease?

Do you know your rent escalation provisions?

 

What Does Your Rent Cover?

This is Part 5 of a series of articles about leasing commercial space for your business.  Stay tuned for the next installment . . .

In the previous installment, we looked at space build-outs.

 Today’s topic is rent.  Sounds simple, right?  Maybe not so much.

Office Floor Plan

Office Floor Plan

Do you agree that knowing how much rent you will pay on your business space is key to your planning and budgeting? Assuming you answered, “yes” (and I hope you did), be aware that “rent” can take a number of forms.

At a minimum, your lease will state your rent as a set dollar amount per month or year, or a dollar amount per square foot (usually an annual amount). Frequently, this amount is called “base rent.”  Do you know what base rent includes? Does it cover utilities, heating and air conditioning services, snow removal, trash removal and all other conceivable services?  If so, your landlord is providing you with a “gross lease”.  In a gross lease, the landlord pays all expenses associated with owning and operating the property.  In such a lease, your rental payments over the course of the lease term are set at the beginning of the lease and are easily predictable.

Some leases provide for additional rent – an amount over and above the base rent.  For example, a lease might provide that the tenant pays a share of one or more operating expenses (e.g., real estate taxes, insurance premiums, and CAM).    CAM refers to the maintenance costs for the common areas of the building/shopping center shared with other tenants and the public.   A lease which provides that the tenant pays a share of some, but not all, of the property’s operating expenses is referred to as a “net lease” or a “modified gross lease.”  When the tenant pays for a share of all of the property’s operating expenses, you have a “triple net lease,” also referred to as “NNN.”

In a net lease or triple net lease, the tenant’s share of the operating expense will typically be determined by the tenant’s proportionate share of the space it occupies compared to the total square footage of the property.  Because there are variations on how that proportionate share is determined, which could significantly impact the amount due from the tenant, you should make sure the percentage stated in your lease accurately reflects your proportionate share of the entire property.  An accurate measurement of the space’s square footage is key to determining your portion of the operating expense.

Another critical aspect of the lease is the definition of the operating expenses that are being passed through to the tenants.  While the general concept is that only true “operating expenses” are included, leases sometimes include capital expenditures (like putting on a new roof) in the definition of operating expenses.  In that case, the tenant might find itself with a large, unexpected bill from the landlord if the property needs some major repairs or renovations.  Pay close attention to how the lease reads with respect to the operating expenses for which you are responsible.  In addition, while the past does not always predict the future, ask for historical information on the passed-through operating expenses. That information will help you budget better.

In addition to expenses passed through to tenants, a tenant may incur additional costs if the lease allocates additional responsibilities to the tenant.  For example, the tenant may be responsible for plate glass (if so, you might want to take out plate glass insurance), maintaining the HVAC system, plumbing, doors, or various other property maintenance items.  Know your responsibilities under the lease so you don’t get any nasty surprises.  All these responsibilities will add to the cost of the leased space.  You should include these costs when budgeting and planning.

One more thing – take a look at your rent escalation clause.  Most leases will provide for an annual or other periodic rent increase.  The increase may be a percentage of current rent, a dollar amount, based on cost of living increases, or some other formula.  Factor the increases into your budgeting, as well.

The more information you have about actual expenses and potential costs, and the better you understand the lease provisions, the more accurately you can plan and budget.

 In the next installment of this article, I will address some other factors critical to making your leasing decisions.  In the meantime, feel free to email me at hedy@hedynelson.com, call me at 410-544-2931, or complete the contact form below for assistance with your leasing needs.

Commercial Space Build-Outs

 

This is Part 3 of a series of articles about leasing commercial space for your business.  Stay tuned for the next installment . . .

In the previous installment, we looked at the importance of location in terms of environmental matters, zoning, economic development of the area, and the identity of the landlord.

 Today’s topic is build-outs.

barbaro bldg pic

1071 MD Rt 3 N office for lease. Call 410-544-2931

 

Whether you are looking for retail, office or industrial space, no doubt the configuration of your space is vitally important to you.  You might even have a vision of how it will look.  Don’t leave to chance the look, feel and functionality of your space.  The last thing you want is signing a lease and then finding out that you will not be able to build it out the way you want.   Incorporate plans for your space as an exhibit to your lease.  Be as specific as possible, down to the materials to be used.  Depending on the complexity of the build-out, you may want to consider hiring an architect to design the space.

Once you have the plans for the build-out all worked out, determine who will perform the work, who will pay for it, and who will pull the necessary permits.  In some cases, the tenant will be responsible for the cost, as well as pulling the permits and performing the work.  If that is the case, the landlord may want to approve the contractors the tenants will use.

In other cases, the landlord will be willing to foot the bill for the build-out, and will want to control the work and the permits.  In those cases, the landlord will most likely be looking for a higher rental rate and/or a longer term lease in order to recoup some of the expense.

In still other cases, the landlord might give the tenant a build-out allowance, which will cover some or all of the cost for the construction.  The allowance might come in the form of a rent abatement for a number of months, or an agreement by the landlord to pay for all or a portion of the work done.  Either party might be responsible for actually performing the work and pulling the permits.

In any event, the lease should be clear as to who is responsible for performing the work, who is responsible for paying for the work, and who is responsible for obtaining the appropriate permits.  The lease should also clearly state the timeline for the performance of all the work.  In some areas, permits can take quite a bit of time to secure, so check with your local permitting agency to see how much time will be necessary before work can begin on your project.

The moral of the story is that there is no hard and fast rule about build-outs.  Negotiate with your landlord to find a solution that works for both of you.

 In the next installment of this article, I will address some other factors critical to making your leasing decisions.  In the meantime, feel free to email me at hedy@hedynelson.com or call me at 410-544-2931 for assistance with your leasing needs.

 

Your Business Lease – Your Health, Zoning and the Landlord

This is Part 2 of a series of articles about leasing commercial space for your business.  Stay tuned for the next installment . . .

In the previous installment, we looked at the importance of location in terms of visibility, traffic, cost, and size.  Click here if you missed it.

Environmental matters present another important consideration when choosing a space for your business.  For your own health, and the health of your employees and customers, you want to make sure your space is not located on a toxic waste site.  You also want to make sure the space and HVAC system are clear of mold.  Look around at the use of neighboring properties and make sure they are compatible with your intended use.  If you run a child care center, you may not want to locate it near a chemical processing plant.

Next, in addition to looking at the current use of neighboring properties, check with your local zoning and economic development agencies to see what uses are planned for the area.  The longer your lease term, the more relevant future development plans become for you.

As a related matter, you must also make sure that your intended use of the space is permitted by local zoning ordinances.  Depending on the type of business you have, you may need to have the property inspected by a local government agency.  You may also need to obtain permits in order to make tenant improvements, get a use and occupancy certificate and run your business from that location.

Finally, know your landlord.  Does the property owner manage the property, himself, or does a property management company handle management?  In either case, if possible, ask other tenants whether the landlord is accessible, reasonable and responsive.  If there is a problem at the property, you will want it addressed promptly and satisfactorily.  If an issue arises under your lease, you want to know your landlord will be reasonable in attempting to resolve it with you.

​In the next installment of this article, I will address some other factors critical to making your leasing decisions.  In the meantime, feel free to email me at hedy@hedynelson.com or call me at 410-544-2931 for assistance with your leasing needs.

Leasing Commercial Space – Part 1

This is Part 1 of a series of articles about leasing commercial space for your business.  Stay tuned for the next installment . . .

Thinking about leasing new space for your business but not sure how to pick the right place? You’ve no doubt heard the old adage about real estate – “location, location, location . . .” True, location is key – but a good location does not mean the same thing for all businesses.  In addition, there are many other factors to consider in selecting your business’ new home, as well.

Visability and traffic – some businesses, such as fast food restaurants and convenience stores, rely heavily on drawing business from passers-by.  For those businesses, there is no substitute for visibility from highly travelled main roads.  However, visibility and traffic come at a price.  Tenants typically pay a premium for those high visibility/high traffic sites.

Let’s say you get your customers mainly from referrals.  You may not need the most visible space on the most highly travelled road in your area.  Instead, consider a less visible site that has adequate parking and easy accessibility for your clientele.

Another important aspect of your space is the square footage. While it may be obvious that you need enough square footage to operate your business today, you also want to consider future operations.  Look to your neighbors.  Is there any possibility you might be able to expand into an adjacent space if you have significant growth?  Maybe there is potential to lease a larger space than you need at the moment and sublease a portion of it to another business (with the landlord’s permission, of course). In any event, balance planning for future expansion with the cost of additional space you might not currently need.

In the next installment of this article, I will address some other factors critical to making your leasing decisions.  In the meantime, feel free to email me at hedy@hedynelson.com or call me at 410-544-2931 for assistance with your leasing needs.