The business world is full of negotiation, and the price of your rent will be one of your first opportunities to sharpen your skills. As you seek to find a prime piece of commercial real estate, there are a few things to keep in mind to ensure you secure a fair rental rate for your property.
Length of Agreement
As a new business owner, the unsure future makes it difficult to know how long you’ll need a lease. Experts recommend that initial lease agreements should last for one to two years with the option to extend. A lease broker and real estate lawyer can guide you in factoring in rent increases over time to avoid unexpected additional charges. These professionals can also help you negotiate the length of the agreement with the landlord and ensure you aren’t charged more rent than you’ve agreed to. Having a lawyer read over your contract in detail can guarantee all clauses and fine print are understood and that the terms of the contract are acceptable to you.
There are also several clauses you should consider including in your contract. These can offer protection for your company now as well as in the future.
- Co-tenancy: Many commercial real estate properties have an anchor tenant as well as smaller businesses. If the landlord loses the main tenant, your company could suffer a drastic decrease in customers. A co-tenancy clause will protect you in this case and allow you to break your agreement to avoid the loss of clients.
- Sublease: If you decide to move or close the specific location before the end of the term, a sublease clause will give you the option of subletting your space to avoid default.
- Exclusivity clause: Another factor that can affect the success of your company is the proximity of your competitors. Many commercial landlords will allow tenants to write in an exclusivity clause that prevents the other spaces in the complex or building from being leased to your direct competitors, guaranteeing exclusive access to your target market.
Repair and Maintenance Costs
Commercial leases often require tenants to cover some or all of the bills for their own maintenance and repair costs, meaning you’ll have to factor extra funds into your budget. One way many landlords arrange this is by dividing the costs for regular maintenance between all benefiting parties. This means if your complex has scheduled lawn care or snow removal, the bill will be split between all businesses in your complex. Other landlords may only require you to pay for certain repairs, such as air conditioning or heating issues. Units generally have separate utility meters, which allows each business owner to be in charge of her or his own energy bills. This matter is one that will need to be discussed during the negotiating phase, as it will affect your overall costs each month.
Another part of the contract that needs to be decided is the penalties that will incur if you default on your lease agreement. Your landlord should state in writing what steps will be taken to collect payment and what the consequences will be if you fail to pay at each step. Some landlords will enforce an immediate lockout if rent is missed while others may offer a grace period or charge interest. Be sure to write each party’s responsibilities and consequences in the contract so that your rights will be protected and you’ll know exactly what will happen if you cannot pay your rent.
As you enter the initial phase of commercial real estate lease negotiations, keep these things in mind and decide what you’re willing to agree to in each situation so you’ll be prepared when discussing the agreement. By deciding which terms you’ll accept and consulting a real estate lawyer and broker, you’ll be ready to sign a lease that will support your business interests now as well as in the future.
The content on our website is only meant to provide general information and is not legal advice. We make our best efforts to make sure the information is accurate, but we cannot guarantee it. Do not rely on the content as legal advice. For assistance with legal problems or for a legal inquiry please contact you attorney.