Things to consider when negotiating a Commercial Lease
When negotiating a Commercial Lease there are many factors at play that you need to dig into. Whether it’s Retail, Industrial or Office. In this instance, we’ll discuss a Retail Lease.
1. Rental rates: Negotiate for a fair and competitive rental rate that aligns with your budget and business goals.
2. Lease term: Consider the length of the lease and whether it suits your business plans, taking into account any potential growth or expansion needs in the future.
3. Renewal options: Discuss and negotiate the availability of renewal options in the lease agreement, allowing you the opportunity to extend the lease beyond its initial term.
4. Security deposit: Determine the amount of the security deposit and negotiate a favorable amount that is manageable for your business.
5. Maintenance responsibilities: Understand the maintenance responsibilities outlined in the lease agreement and negotiate for a fair allocation of maintenance and repair duties between the landlord and tenant.
6. Use clause: Carefully review the permitted use clause, ensuring it aligns with your business operations. Negotiate any necessary changes or additions to accommodate your business needs.
7. Improvements and modifications: Discuss with the landlord the possibility of making improvements or modifications to the space and negotiate the terms, costs, and responsibilities associated with any potential alterations.
8. Utilities and services: Clarify which utilities and services are included in the lease and negotiate any changes or adjustments based on your business needs.
9. Assignment and subletting: Understand the landlord's policies on assignment and subletting and negotiate the ability to assign or sublet the space, if necessary.
10. Termination clauses: Review the termination clauses and negotiate for flexibility in case of unforeseen circumstances or changes in your business circumstances.
11. Insurance requirements: Understand the insurance requirements specified in the lease agreement and negotiate any changes or additions that suit your business needs.
12. Rent escalations: Be aware of any rent escalation clauses or rent increases over the lease term and negotiate for reasonable increases that align with market conditions.
13. Personal guarantees: Determine if a personal guarantee is required and, if so, negotiate the terms of the guarantee to limit your personal liability.
14. Legal and professional fees: Consider negotiating terms regarding legal fees, ensuring that costs associated with lease negotiation and review are fair and clearly outlined.
15. Compliance with laws and regulations: Ensure that the lease agreement reflects compliance with all applicable laws and regulations and negotiate any necessary changes or additions to protect your business's interests.
It's recommended to consult with a qualified attorney or commercial real estate professional experienced in lease negotiation to get proper advice and assistance throughout the process.
After 20 years in the Commercial world these are just a few items I have encountered in my time. If you are looking to gain more insights into the above and how I can guide people and businesses in navigating the complexities of commercial property, please feel free to get in touch.
Peter Jarjoura