5 Tips to Consider While Negotiating on a Commercial Lease
Commercial lease is something that plays an important role in the profit of your business. Wondering how? What would be your profit if you are paying all your earnings as the rent to your office space? That’s definitely a point to be thought of, and this is where the negotiation comes into picture. Negotiating on a commercial space can definitely put your business in a good position. As an occupier the main responsibility of yours is to read the lease agreement completely and understand it.
Below mentioned are a few tips to be considered while negotiating on a commercial lease.
- Evaluate the Length of the Lease
Once you feel that you have found an ideal location for your business, you will have to apply for real estate lease, and you will receive the real estate forms for your lease. As soon as you receive the form, the first and foremost thing to be considered is the length of the lease.
Usually, the term of one or two years is best for a small business with an option to renew the agreement. This doesn’t tie you up to stay there for a long time, but gives you an option to continue if you wish to.
- Research Comparable Rents
The amount you pay as the rent is a very important point to be considered in a commercial lease agreement. You have to make sure that you have done a thorough home work to know the costs running in that particular location, so that you can negotiate for a fair price.
The landlords will always be likely to increase the rent for each additional year. Just try to work out a cap, so that the rent increases remain affordable to you. You can also negotiate on the security deposit and the condition for its return.
- Look for Hidden Costs
This is the thing that keeps you wondering at the time of paying the rent! Your lease may be a ‘gross lease’, where all the costs are included or ‘net lease’ which is exclusive of some hidden costs. Most of the commercial leases make the tenant responsible for maintenance costs or the costs to keep up the common areas. Have the complete details of hidden costs and negotiate on this to be favourable.
Just see if your business is responsible for the specific system maintenance or the current conditions, and you easily estimate the costs. Negotiate with the landlord for a slightly higher rent in exchange to that of these additional costs. If you think, paying the additional amount works for you, go with it.
- Ask for Favourable Clauses
You can always ask your landlord to make minor modifications on the lease. For instance, you can ask for a clause to sublease the property. You can also ask for the one that restricts landlord to rent out some amount of area to other units on the premises.
Co-tenancy clause allows you to break the lease if the large anchor tenant makes the move. You can also negotiate with the landlord to be responsible to make improvements before you move in to the place.
- Check the Termination Clause
Make sure you read the terms of your commercial property lease, as it pertains to default and termination of the lease.
Having a proper termination clause, you can negotiate on the penalties for terminating before the time is up.
Most important thing over all these is to read the commercial lease carefully and understand it properly before signing it. This allows you to be an upper hand while negotiating as you will be aware of the benefits you are availing with the lease. Not just that, it also prepares you to be responsible as a tenant.