Tips For How to Negotiate a Commericial Property Lease

Starting a new business can be overwhelming and challenging, and one of the most difficult parts can be finding an affordable office space. If this is your first business the process of finding a lease that works for you and your business can seem daunting, but there are a few questions and things to consider before jumping into a lease.

Setting the Term of your Lease

The term and rent of your location is the first point that needs to be negotiated. The trick to this is to not over commit if you are a small business. It's recommended that small businesses negotiate one to two year leases with the option to renew. You will also want to discuss and negotiate rent increases over the term so you are not unexpectedly hit with a rent increase with no warning from your landlord.

Be prepared for your landlord to push back, they may try to lock you into a longer agreement by offering deal sweeteners. It is helpful to bring a broker to negotiations, as they know about the local market and what sweeteners to look out for.

Expenses

Like residential leases, landlords often tack on extra expenses like maintenance fees, upkeep fees and so on. Make a point to ask the necessary questions during negotiation: what about utilities? how are these extra charges measured? Also look into the "hidden fees" and policies and inquire about the average costs of previous tenants.

Maintenance and Repair

Unlike residential leases where the brunt of the maintenance and repair responsibilities fall on the landlord, commercial leases are different. Commercial leases vary in their approach to this, some stipulate that it is the tenant that is responsible for all the property upkeep while other specify that the tenant is only responsible for certain repairs etc.

Defaulting

Often businesses get closed down due to defaulting their lease. In order to protect your interests and your customers, it is important to know exactly what defaulting terms you are agreeing upon upfront. Talk with your landlord and decide if you will be locked out immediately or if you will be granted a grace period. Will you be able to negotiate for more time for yourself if you default? All of this information is important as it can save you  and your business money.

Read Your Lease

It goes without saying that you should always read and reread your lease carefully and completely to make sure you fully agree with and understand all of the terms and clauses.

About the author: Mary is a guest contributor from The Lansing Economic Area Partnership or LEAP, a coalition of area leaders committed to initiating Lansing, Michigan economic development.