1. The initial draft of a Commercial Lease will mostly favor the landlord. There is no standard commercial lease form and a there are many opportunities for tenants to negotiate better lease terms to give them some protection.
2. It is important to know the local commercial rental market by talking to other tenants and commercial real estate brokers in the area. For example, do you know what the current market is in the area for comparable rent and common area maintenance?
3. A tenant should consider more than one space that will meet their businesses needs. You are negotiating from a weak position when only one space is considered. If you can not successfully negotiate terms with one landlord, you may be able to come to better terms with another landlord.
4. It is important to understand the terminology of the lease so you are clear on what you are agreeing to. A good real estate attorney can review and summarize the lease with you so you have a basic understanding of the many commercial provisions typically included for landlords and tenants.
5. A tenant should know what their total cost will be to lease a space, and what their obligations would be if they are to default on the lease. Some commercial leases are called net leases and require a tenant to pay additional monthly charges for taxes, insurance and common area maintenance; other leases are based on gross rents and are all inclusive of rent and operating expenses.
6. The term of the lease is important. If you are starting a new business, it may be best to have a shorter term lease. If you are an established business, than negotiating a longer term lease may offer opportunities for landlord concessions. A longer term lease eliminates the need and expense of re-leasing the property and ensures a more stable income for a property owner.
7. It is often necessary to make improvements to a space so that it fits your particular business needs or meets a franchisor’s requirements. A landlord may be willing to negotiate some of these costs improvements, alterations, renovations, or remodeling costs with a tenant. This is called the build out, or tenant improvements, of a space.
8. Most commercial retail leases include terms about the permitted use for the space. It is beneficial to negotiate broad usage terms in case the business expands or another tenant sublets the space.
9. Negotiating the right to sublet or assign a lease to another tenant is a valuable business strategy. If a business owner eventually wants to sell their store, business of franchise, the ability to assign the lease or sublet the space to another tenant will offer flexibility for future plans.
10. Landlord’s obligations must be written, there is no “implied” duty to repair in commercial leases. And tenant’s obligations must also be clearly set out. There are many details in a commercial lease that should be addressed regarding maintenance and repairs the of the leased premises, building, building systems and common areas. A landlord should be obligated to minimize interference with a business. It is helpful to negotiate the right to do critical repairs in the leased premises.
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