Capital Region Legal News

Monday, August 8, 2016

Tips for Negotiating a Commercial Lease

How can my business get the best deal for renting commercial space?

Many small business owners in the Capital Region who rent office, retail or restaurant space need to be able to negotiate a commercial lease with landlords whose main objective is to maximize profits. There are steps you can take, however, to protect your interests and get the best deal.

Market Conditions

First, in any commercial transaction it is essential to understand the market conditions. While pricing is based on square footage, it is necessary to ascertain whether there a lot of vacancies or if similar space is at a premium. In addition, it is critical to learn how much rent other businesses are paying for similar properties in your location. Armed with this knowledge, you have the power to negotiate.

Repairs, Maintenance, and Build-outs

In addition to rent, it is also critical to establish who is responsible for covering the cost of repairs and maintenance to your space, as well as the building and grounds. In some cases, you may be required to pay for utilities, insurance, custodial services, security costs and the like, or the landlord may pay for some if not all of these costs. Further, if you are renting a new space, you should also try to negotiate with the landlord to customize the space to suit your business purposes or to finance build outs.

The Term

Next, it is important to avoid getting locked-in to a long term lease. While the terms of a long term lease are typically better, and can protect your business from repeated and sizable rent increases, it is important to have more flexibility. This can be done by negotiating one or two year leases with a renewal option.

Options and Incentives

If you are already renting a space, your track record as a good tenant that paid the rent in a timely fashion can help you renegotiate more favorable terms of a new lease. While many commercial leases have renewal options built-in, it is not necessary to exercise this option automatically. If the conditions of the market, or your business have changed, or you are not satisfied with the terms of your existing lease, it may be best to negotiate a new lease.

At the end of the day, the goal of any business is to be successful, and negotiating a favorable commercial lease can support that objective, provided that you engage the services of an experienced commercial real estate attorney.

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