It’s no easy task to work out a deal for a satisfactory lease, especially if you’re new to the business. But once you know what to look for and ask for, you can negotiate the right lease that’s perfect for your office or retail space. Consider these six tips before you sign a lease:
1. Get the Right Expertise
Negotiating a favorable lease will yield better results if you seek the right help. Identifying a good commercial realtor who has experience with your type of property is key, says Bill Armstrong, treasurer of the National Association of Realtors. It’s especially important to have a real estate attorney look over the lease before you sign to avoid the many pitfalls associated with real estate, says Robert Steeg, managing partner at Steeg Law, a real estate law firm in New Orleans.
2. Examine the Location
If you find a building that’s ideal, the surrounding location may not be. Before signing a lease, make sure that you don’t have any direct competitors in the area that could impact your business, Armstrong says. Also, consider being close to food service establishments, dry cleaners or other service-related industries that would be of value to employees. Being vocal about a lack of amenities could be beneficial during negotiations, Armstrong says.
3. Push for a Short Lease
Don Canale, president at CanAm Steel Building Corporation, a steel building systems manufacturer in Denver, learned how to negotiate when his company went from operating out of a home basement to a commercial building in 2002. Because the company was growing, Canale told the landlord he wasn’t comfortable with the proposed term of five years and was ready to walk away. “We were a bootstrap operation, and we didn’t want to bite off more than two or three years,” he says. When Canale stood his ground, the landlord gave Canale a two-year term with a third-year option.
4. Don't Budge on Your Essentials
When Canale first asked for his lease to include a provision that would let Sascha, his German shepherd, come to work with him, the landlord refused. But Canale didn’t think it was fair for his faithful companion to be stuck at home while he was at work for eight to 12 hours per day, so he didn’t let up. Eventually, his landlord caved and made an exception for him. Canale then rewrote part of the lease to clearly state his dog’s right to enter the building and use the stairs.
5. Plan Ahead, Establish Expectations
Be mindful of your facility’s needs and make sure they're not things your landlord can take away or change. For example, your office building may have plenty of parking at the start of your lease, but it's possible that won't be the case later on if your landlord wants to turn parking spots into more leasing space, Steeg says. Failure to fix an essential service in a timely manner is another potential problem. If the elevator in your office building breaks and isn’t fixed within the amount of time stated in the lease, you should be able to refuse to pay rent, Steeg says.
6. Protect Your Assets
Most landlords insist on personal guarantees, and as the tenant, your personal assets are at stake if you don’t pay rent on time. Because of that risk, it’s important to register your business as a corporation or LLC so the legal entity is the responsible party, Steeg says. If you can’t get out of giving the personal guarantee, persuade the landlord to place limitations on the guarantee to limit the exposure to your personal assets, he says. Once you have established a good track record for paying rent, the risk to your assets can decrease over time and eventually be eliminated, he says.
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