Stop Clause
Definition of "Stop clause"
Leasing commercial or industrial real estate can be a perplexing process. As a tenant (and as a landlord,) you must consider several aspects before actually signing the deal. Even top local real estate agents recommend you to ask fundamental questions from your potential landlord.
For instance, it would be best if you discussed details regarding the lease agreement and various clauses and provisions embedded to avoid future unpleasant surprises. Revealing and learning about crucial information on these agreements form the basis of landlord-tenant rights.
What does a stop clause in a lease agreement refer to?
A stop clause is integral to real estate deals, especially apartment leases. Under such circumstances, a stop clause, often known as an eviction or escalation clause, defines a provision in a lease agreement. More precisely, it indicates the maximum amount of operating expenditures that the landlord of the rental property is supposed to incur in a given year. The lessee must pay any amount incurred in excess of this amount.
Landlords can change provisions to fend off an unstable market.
Landlords are skilled at including stop clauses and escalation provisions into lease agreements. Imagine that rents in a particular area are rapidly rising. In that circumstance, landlords may reconsider signing a long-term lease instead of a short-term one. They know that this might result in a lost profit or a decrease in property valuation.
They can, however, increase rent by a particular amount at periodic intervals by including an escalation provision in the rental contract. As a result, they may capitalize on current market conditions. At the same time, the tenant can secure and safeguard their long-term contract.
The tenant’s financial obligations
On the other hand, landlords can demand that their tenants pay a pro-rata share of the growing building expenses. These payments may cover the premises’ operating charges and various real estate taxes. In matters of a commercial lease, the landlord will incorporate their legal requirements into the escalation or stop clause. Therefore, a renter’s payment determined under the stop clause will be considered a supplement to the standard rent the tenant covers.
Consequences of contract breach
In other words, the stop clause can set contract termination conditions. For instance, a theater proprietor signs an agreement with the producers of a theatrical performance. In the deal, they stipulate that the showrunners must leave the venue in the case that receipts of payment don’t add up to a certain amount.
Final thoughts
As you observed, knowing the leasing contract’s terms and provisions is paramount both for tenants and property owners.
Suppose you entertain the idea of becoming a landlord. First and foremost, we advise you to investigate the rental market conditions in your area, such as where you should purchase a rental property first. Then, study previous lease contracts and include necessary clauses into your agreement to safeguard your financial investment.
Popular Real Estate Terms
Obligation taken on by a person who did not obtain it originally, but agrees to honor the terms of the existing obligation as a condition for the transaction. By assuming the loan rather ...
An asset. The term cost is often used when referring to the valuation of acquired property. When it is used in this sense, a cost is an asset. Concepts of cost and expense are often ...
An adjustment to the internal rate of return (IRR) computation so as to improve this measure. This uses a risk-free after-tax rate and a customary rate for money reinvestment. ...
Literature, samples, equipment, tools, and other useful information that real estate brokers or agents can use for demonstration purposes to prospective buyers. ...
In general terms, a licensee means a person or legal entity who has received authorization or permission to perform a particular activity through another party (the licensor in our case.) ...
Legal document that conveys real estate to the lender after the borrower defaults on his or her mortgage payments. The borrower should demand cancellation of the unpaid balance and a ...
The accelerated depreciation definition is a type of depreciation that makes it possible for a homeowner or real estate investor to depreciate their property faster than the straight-line ...
Concept used in valuing real property that conditions may be altered requiring a revised estimate of market value. These conditions include a shift in the demand/supply relationship, ...
Combination of two or more real estate brokerages into one, with only one company retaining its identity. Typically, the larger of the two companies is the company whose identity is ...
Have a question or comment?
We're here to help.