How to Negotiate Commercial Property Lease

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How to Negotiate Commercial Property Lease
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There are various factors to bear in mind when negotiating the lease. The first is that you should always negotiate; no matter what the price they offer there is always room for negotiation. Apart from that you have to do your research so that you know how to best negotiate the deal - knowing what to look for; what the strong and weak points of the lease is like.

Do Your Homework

The first thing you need to do is assess what you truly need - how large you need the premises to be (and how long until you think you will need more space), parking, infrastructure, storage, accessibility to major roads, visibility, wifi coverage (believe it or not - there are still spots that aren’t covered well, especially hilly areas are a problem, as are some different kinds of buildings) and so on.

You also need to research average prices in the area - what’s a fair price to pay for the kind of property you are looking for? And what are the “perks” you are willing to pay extra for? Some places might be aesthetically nicer, but a lot pricier. Is it worth it?

Make list of priorities (deal breakers) and a list of nice things to have (perks). Also know your budget and know it well - it’s not worth getting something that will mess up your budget. There is always something that will be perfect for you - don’t give into something just because it’s nice, although pricey. Get clear on what you want and have patience.

Length of Lease

You need to negotiate the length of the lease. The landlord will want to keep you for as long as possible and preferably without you saying anything about the rent increase. You, on the other hand, want to be careful with how long you sign up for - things may change. You also have to negotiate rent increase up front.

Whilst it’s tempting to opt for a long term lease if the rent is lowered, you don’t know what will happen in years to come. Unless you are certain you will want to stay in this location for a long time, opting for a longer lease for a lower rent, or less rent increase, isn’t always the best thing. You might need more space a year down the line, or maybe you’ve realized this isn’t the best area for your business. You never know what will happen, so have some foresight. 

Rules and Permits

Can you sublease part of the commercial property if you want to? Can you repaint the walls? Remodel? Are there zoning regulations and other laws that might affect your business?

Make sure you are aware of anything and everything that might affect your lease and/or your business when operating on the premises.

Maintenance and Repair

Find out who takes care of maintenance and repair. Sometimes it’s you, sometimes the landlord. There may also be special clauses depending on what it is and how the damage was done. If possible also chat to other tenants to find out how well these things have been managed in the past. Also ensure there is a number where you can reach the landlord, or someone else in case of an emergency repair needing to be taken care of straight away, such as a big leak.

The Area around the Premises

Is any development currently taking place in the area? Will that disturb your business (like someone building a skyscraper next door, or repairing the actual building you are in)? If development is taking place in the area it can be great, but it will likely also lead to increased rents.

Broker and Lawyer

You may want to hire a broker, but as he or she gets commission when you sign the lease, they are still not entirely on your side. So even with a broker, make sure to get a property lawyer that can help you have a look at the fine print, as well as point out things you might have forgotten to take into account.

Add Clauses

In many cases you want to add clauses. Often subletting is a clause you want on the lease - in case you can’t stay till the end of the lease you can rent it out. Also, an exclusivity clause might be necessary if you don’t want a competitor in the building. And if you are renting the property specifically because there is another business in there that will help bring in customers for you, then a co-tenancy agreement is necessary. This can prevent loss in case the other business leaves and the landlord doesn’t secure another business in its place.

Read the Contract

After you’ve negotiated the lease, be sure to read the contract with a magnifying glass and have your lawyer do the same. Even if you negotiated the lease, it doesn’t mean the landlord didn’t stick something in there that he or she forgot to tell you about. It may also be worded in such a way that liberties are taken without you noticing.

Negotiate

Never leave out the negotiation process, no matter how good a deal looks. Always point out the weaknesses of the property, or argue that something you would really want is missing. At the very least ask them what the best price they can give you is and ensure it’s no higher than what other tenants in the area are paying, unless the building has perks they don’t.

Even if the price is not negotiable, there might be other terms you can negotiate, such as special clauses, the ability to remodel the place and so on.

Author Info Nitish Khannanot found
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