Commercial Lease Negotiation Checklist: 7 Steps Before You Sign a Business Lease
A commercial lease may impact your business for decades. This is why you should never rush the commercial lease negotiation. By preparing before you ever step foot in front of the landlord, you will find yourself with better terms, fewer unexpected expenses and far more protection for the future challenges confronting your business.
Follow the checklist below to negotiate effectively and evaluate all options before you sign any lease.
1. Define Your Business Needs
Know what you want from a lease before talking terms consider space for parking, customer access, and access to future expansion.
With well-defined priorities, you are able to negotiate your commercial lease agreement appropriately rather than getting caught up in terms that do not benefit your business.
2. Review Every Cost
The monthly rent is just one component of the overall cost. Make sure you get an exact itemization of all charges before deciding.
Look for costs such as:
- Common area maintenance (CAM) fees
- Property taxes
- Insurance contributions
- Utility charges
- Maintenance costs
Knowing the entire financial burden allows you to place side-by-side comparisons of other properties.
3. Discuss Lease Flexibility
The business needs can easily change over time. A flexible lease can simplify matters for you down the road.
Consider negotiating:
- Renewal options
- Early exit clauses
- Expansion rights
- Subleasing permission
- Rent review schedules
In commercial lease negotiation, these terms can provide much relevance.
4. Clarify Maintenance Responsibilities
Maintenance is one of the most neglected aspects of a commercial lease. Specify in the contract who will be responsible for repair, building maintenance, and equipment repairs, etc.
Having clearly defined responsibilities will prevent disputes after your business moves into the property.
5. Check Property Condition
Examine the site before signing. Go around with the landlord and identify what needs to be repaired before finalizing.
By documenting the condition of a property, you will be agreeing to no disputes in the future and helping him when the time comes for you to negotiate leasing a commercial space with this same guy.
6. Ask Questions Before Signing
Never take for granted that each lease term is absolute. If approached in the right way, landlords are generally happy to negotiate.
Important questions include:
- Is it possible for the rent to increase during an ongoing lease?
- What are the penalties for terminating the lease early?
- What improvements can tenants make?
- Do you have restrictions on the operations of your business?
It clarifies, not compounds ambiguity.
7. Seek Professional Advice
Many clauses in commercial leases are often legal jargon that is not easily understandable. You may want a commercial real estate lawyer or experienced property adviser to review the agreement, so you understand your obligations and see if there are terms which should be negotiated.
Having expertise might decrease legal risks and you could be substantially better off by hiring an expert.
Final Thoughts
Preparation, review, and asking the right questions are your keys to successful commercial lease negotiation. By seeing past the rental rates and taking the time to dissect every element of the lease, you may pay less as an overall price to better facilitate your business. With advance planning, a thorough inspection of the property you are interested in renting, and including professional advice whenever necessary is key to negotiating with confidence, and executing a lease that serves your business today as well as years from now.
