Negotiating a commercial lease for your new office space can be one of the more confusing aspects of the office move process. The lease establishes your relationship with your landlord. It not only sets down the rules and regulations for your day-to-day relationship, but also for what happens when things go horribly wrong.
Most landlords and tenants discuss day-to-day aspects such as base rent and concessions in detail before signing the lease. It’s the minute details of the lease agreement, and the terms for issues that arise during the tenant-landlord relationship that are often overlooked. Signing on to bad lease terms can spell disaster for your business. Avoid these 5 common commercial lease mistakes, and set up a solid foundation for your new office.
- Going into the Negotiation Alone
Do not go into a commercial lease negotiation alone. Hire a tenant rep broker. A qualified tenant rep broker will have years of experience in your desired market and understand your space needs. The tenant rep broker (ideally working with a trusted legal counsel) will help you avoid costly oversights in the lease agreement and negotiate terms in your favor. Trying to negotiate alone and avoid broker fees often leads to much more costly lease problems in the long run.
- Signing a Standard Lease Agreement
Opting to sign a standard lease agreement rather than negotiating puts the future of your business in the hands of your landlord. With a standard agreement, your business is likely to take the brunt of the financial burden for any damage that occurs to your space. Take the time to negotiate the terms of your lease, and protect your business.
- Not Checking Rate Fluctuations
Does your lease say the landlord can reevaluate the space during your lease, and up certain rates such as electricity and water? You may sign on to paying a reasonable rate, but find your landlord has tripled the cost by the end of the year. Make sure the terms of any rate increases are clearly spelled out to avoid surprises.
- Missing a Pre-existing Condition Clause
A pre-existing condition clause requires you to return the space to its original layout – including removing flooring, demolishing new walls, repainting, etc. Depending on how many changes you plan for your space, this cost could balloon quickly
- Forgetting Real Estate Taxes
What percentage of the building’s real estate tax are you responsible for? Make sure you understand both the proportion of the real estate tax you will pay, and what happens when the rate goes up. Otherwise, landlords may increase your portion of the tax more than is proportional to the tax hike.
Landlords will try to squeeze the most possible profit from their properties, and it’s your job to check the terms of the lease before you sign. Hire a broker early and discuss a clear game plan before starting the negotiation process. Your business will thank you!