Negotiating Commercial Leases

Tips For Tenants On Negotiating Commercial Leases

As your business grows, you are getting pressured to find a new place to set up shop and bring in the people and equipment your growth demands. This means heading out into the world of commercial real estate and negotiating a lease that is to your advantage.

As in any negotiation situation, both the landlord and the tenant want to get the most value from a commercial leasing situation. Tenants need to know where they have leverage, and what areas of a lease offer them the best opportunities to negotiate from a position of strength.

Be Careful With The Lease Commencement Date

It is important that tenants do not agree to a lease commencement date that will have them paying rent for a facility they cannot use. If the landlord has agreed to make alterations to the proper in anticipation of the tenant moving in or if the property needs repairs done before the tenant can take the keys, then the lease commencement date should not be until after those alterations have been made.

Many business owners get excited about finding a new property and feel that they have to take financial responsibility for the property immediately if they want to keep it. You can negotiate a lease commencement date that is fair to you and still keep the property. You should avoid paying for a property you are unable to use at all costs.

Operational Costs

Tenants should be sure that they are only responsible for operational costs that are incurred while they are using the property. Some landlords sign utility or other types of agreements that are paid for quarterly or bi-annually. The tenant should be careful to not get roped into paying an entire quarterly invoice just because they happen to move into the facility towards the end of the quarter.

Be Specific On The Use Clause

The last thing a tenant wants is for a landlord to claim that they had no idea that the tenat was going to engage in certain types of business activities and cancel the lease. A landlord has the right to terminate a lease if the landlord feels that the business operations of the tenant are detrimental to the property or the community. Before signing a commercial lease, a tenant should be very sure that the use clause in the contract is comprehensive and that it alerts the landlord to all of the business activities you will be engaged in.

Tenant Defaults

In any commercial lease, there are tenant defaults that can seem a little extreme. While you as a tenant may not feel that these defaults will apply to you, it is important to understand each default and try to negotiate terms that are not so damaging or extreme.

It can take a long time for a business owner to find the perfect property, and then it can take even longer to negotiate a lease that meets the tenant’s terms. But a commercial lease tenant should go into every negotiation with the idea that their needs are just as important as the landlord’s.

It is up to the tenant to make sure that the lease allows the tenant to run their business as they see fit, and that there is a decreased possibility of surprises that could suddenly get the tenant evicted. A tenant has rights, and the tenant should be aware of those rights as they are negotiating their commercial lease. Hiring an experience commercial real estate attorney is the best way to make sure that a lease has everything a tenant needs to run their business.