Negotiating commercial leases can be a complex process. Below are ten factors to consider when negotiating a lease:
- Rent. How much money the business owner pays the landlord is a negotiable term and depends on many different factors. Kocian Law Group can help you bargain for a more reasonable rate as a business owner or a landlord.
- Lease term. The lease term indicates how long the lease lasts. A lease should specify the start and end date of the agreement and state any renewal options and requirements. Renewal options can be critical for business owners seeking to lease property.
- Escalations. Escalation figures dictate how much the rent can increase during the term of your lease.
- Security deposit. This is money given to the landlord by the tenant at the beginning of a lease. The money will be returned to the tenant at the end of the lease so long as certain conditions are met. These conditions can be specified in the lease, but usually deal with damages to the property. Kocian Law Group can help you negotiate the amount of the security deposit and the terms of its release.
- View rights. View rights entitle a business owner to the ‘view’ of a leased space as well as the space itself. For example, suppose your landlord owns a large lot with several buildings. He leases one building to you. A month into the lease, another tenant comes to your landlord wanting to place a new building directly in front of your building. Unless your lease protects your “view rights,” you could find yourself operating a business behind another business, thus making you less visible to clients.
- Exclusivity clauses. Exclusivity clauses limit the types of businesses that can occupy adjacent or nearby property owned by the same landlord. For example, if you run a coffee shop, you probably don’t want your landlord to lease the storefront next door to another coffee shop. Exclusivity clauses prevent this from happening. You can also use exclusivity clauses to “exclude” certain types of businesses that are incompatible with your own business or its image.
- Common area maintenance. Common area maintenance (CAM) clauses address who will maintain the property’s grounds during the lease. This usually includes such basic upkeep as lawn mowing, snow removal, and overall maintenance of the “common” areas of the property. When common-area maintenance is the landlord’s job, business owners are free to concentrate their efforts on successfully running their companies while the landlord makes sure that the property is kept in good repair and ready for customers.
- The exact parameters of the space being leased. A lease must clearly outline exactly which space a business owner has the rights to use. It should also specify whether a landlord is allowed to move a business owner between spaces on a property and whether or when a tenant may request to be moved to another space. This clause gives you the ability to plan for the future.
- Parking spaces. Many commercial leases include a specified number of parking spaces. Your business must be accessible for your customers and your staff at all times.
- How the space may be modified and who will own those modifications. Depending on the type of business, a tenant may want to make modifications to a leased space; a landlord may also want to have the power to alter property. A lease must address who has the right to put in machinery, remove machinery, paint walls, knock down walls, put up signs, and otherwise modify the property. It must also specify who will pay for any modifications and who will own those modifications after the lease has ended. In certain leases, the landlord will do a “build out” and custom build the space to the tenant’s specifications. In this situation, the landlord will typically recoup the cost of the build out by charging higher rent for a longer lease term. The advantage to the tenant is that the work is done for them. In situations where either the landlord does not wish to do the build out or the tenant wants to do their own build out, a tenant may reap more favorable rent. Doing your own build out can be especially useful in negotiating overall terms, as by changing a space for your own use, you are often simultaneously adding value to the property.
Kocian Law Group has the expertise and knowledge to handle the complexity of commercial leases. We will write and review any commercial leases, bargaining for your best interests and protecting your legal rights.