Whether you are looking to rent an office or a retail space, leasing a commercial property is likely to be one of your largest business expenses. Consider the needs of your company and read each clause carefully before signing this legally-binding document.
1. Consider Your Budget: How much can you afford to pay for rent? Be conservative in your estimate, particularly if you are a new company with uncertain finances. Read the lease carefully to identify allowable increases and whether your rent includes utilities, property taxes, maintenance costs and insurance (gross lease), or whether you’ll have to pay for these separately (net lease).
2. Identify the Length of the Lease: If possible, avoid being tied down by a five- to ten-year lease. You want to be free to move to a bigger space if your business expands quickly or if the location doesn’t work out. Check your lease for renewal options as well, in case the location does work out.
3. Determine How Much Space You Need: How many employees will work there? Will you need cubicles or a conference room? What about storage space for supplies or inventory? Choose a space that includes room for your business to grow without overextending your budget.
4. Identify the Ideal Location: Are you looking to rent a retail space? Consider how much foot or street traffic you’ll get at a particular location, as well as whether the surrounding businesses seem to attract your target clientele. Determine whether there is ample parking nearby, and whether your customers will be able to use it. Check zoning rules to be sure your business activities are allowed in that particular space. If you are looking for office space, think about your employees’ commute, the safety of the area and how your location will impact your relationship with suppliers and clients. For some businesses, location is relatively unimportant. For others, it can be the key to success or failure.
5. Make a List of Amenities: If your business requires a loading dock, cubicles, restrooms, improved wiring, or any other modifications, be sure you either find a space that already has these amenities or the terms of your lease allow you to make modifications. Be sure your lease specifies who will pay for these improvements as well.
6. Research the Americans with Disabilities Act: Businesses that are open to the public as well as those that employ more than 15 people must be accessible to disabled people. If the property will require modifications, your lease agreement should specify who will pay for them.
7. Negotiate Clauses Unique to Your Business: For example, you may wish to include a clause that forbids the owner from leasing another space to a competitor. If you’ll be putting up signs to advertise your business, be sure the lease specifies where these signs are permitted.
8. Outline Responsibilities: The lease should state who is responsible for maintenance and repairs on the property, including the plumbing, electrical systems, and heating and air conditioning systems.
9. Specify Termination Rights: Your lease might include the right to sublease the property. You might also incorporate a termination clause that outlines notice requirements and whether you will pay penalties for early termination.
10. Prepare for Potential Problems: Check the lease for a clause that states whether disputes will be mediated or arbitrated outside of court, and find out what the consequences will be if you default on your payments.
Before the lease is signed, you can take steps to prepare yourself in the event of financial difficulty. Some leases may give landlords the right to lock you out or begin eviction proceedings immediately while others allow you to negotiate for more time.Before signing a commercial lease, be sure you read and understand the terms completely and have made provisions for everything your company will need to succeed.
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.