While the internet and modern economy have made it increasingly hard to define “local business” and think about what businesses look like, one thing is still true for many industries and most businesses around the country: you will need a location to operate out of. Leasing a commercial space is a great option that will let you feel comfortable and secure without investing too much of your money up front, but there are some things you need to keep in mind when leasing a property for commercial uses. Namely, negotiating a lease can be tricky, and you shouldn’t assume that negotiating lease terms will be a quick and easy process. Here’s some tips on the most important things you should address in your lease negotiations.
What Are The Terms?
While there are a lot of smaller details you will need to keep in mind when negotiating, it’s a good idea to start with the biggest and most important point first: the terms of your lease. Your basic lease terms will dictate how long your lease runs for, and how much you will be paying in rent for the benefit of using the commercial space you are interested in. Additionally, your basic terms will also dictate whether or not your lease can be automatically renewed, an important factor in making long term plans for your business.
Before you sit down to negotiate the terms of your lease, is a good idea to consult with a Commercial Realtor and a Real Estate Lawyer with any specific legal questions you have. Do not be afraid to have your Realtor negotiate in your best interest and not that of the Landlord. This is very important to your business success.
Who Pays for What?
Beside the straight forward terms of rent and lease duration, the most important thing you will have to wrestle with in commercial lease negotiations is who pays for different elements of a property’s maintenance and upkeep. Unlike residential properties where landlords are responsible for just about all maintenance issues, in a commercial lease a business owner is often liable for some upkeep fees. Those could be as small and simple as specific systems, like maintaining air conditioning, or as big as full responsibility for a property’s upkeep. Make sure that you read your lease carefully to see what maintenance fees you are responsible, and if you can, put a stipulation into your lease that you are only responsible for maintenance up to a maximum amount per year or project.
Where Are The Hidden Fees?
They don’t call them “hidden fees” for no reason, but if you dig through your lease carefully enough before signing, you will be able to find potential places and things you are paying for that aren’t immediately apparent. For example, many commercial leases will charge tenants an upkeep fee for common areas and shared spaces, but if you do not benefit from those common areas it can be worth it to push for a smaller fee during negotiations. Additionally, you will want to be aware of how utility expenses are calculated, and make sure that you won’t get hit with any big fees tacked on to your usual electric and water bill. Read closely and look for all the fees that might creep up on you, and you can hopefully negotiate around them.
What Subclauses Can You Include?
While you may be presented with a basic lease to start, building in subclauses before you sign can help protect your business. During negotiation, ask about the potential to include an exclusivity clause; doing so will ensure that no other business offering the exact same service will be able to open in a commercial area while you are around, and will protect you from niche competition. And there are a lot of other clauses you can negotiate in as well.
A “right of first refusal” clause will help you guarantee that if another commercial space opens up in a plaza or development that you are leasing from, you will be able to get the first bid on it to either expand your business or relocate. A sublease clause will allow you to sublet your commercial lease to another business if your plans change without paying high fees for breaking your lease. An “anchor business” clause will make sure that if there is a signature drawing business in your plaza or development, the development owner will have to replace it quickly with a similar business if they leave. All of these potential clauses can help you protect yourself, and can be introduced into commercial leases during negotiations.
Make sure you understand your Lease. Consult with your Commercial Realtor and a Lawyer to learn about your rights if you are unsure. These professionals will ensure that negotiating a commercial lease will not be a nightmare. Review this post if you are looking for where to start.