Most Important Tips When Negotiating a Commercial Lease
Although anyone can represent themselves in negotiating for a commercial lease, the fact remains that the most efficient and guaranteed way to get a favorable set of terms is by bringing with you a team of experts or legal professionals. Don’t forget that choosing the right commercial lease isn’t the same and as simple to that of renting a residential property since you’re dealing with something that needs to provide help for your business to succeed.
Now supposed you’re confident enough to do the negotiations on your own, you still need a guide that will give you the basic tips on how to make sure the terms of the lease contract will all be within your interests and in favour of your business.
The first thing you would want to ensure is the length of the lease, which at this point will have to be thoroughly evaluated based on your initial verbal agreement and the one written in the contract proposal. There actually are several things you need to do at this juncture, including locating the ideal commercial rental space, filing the rental application, and applying for the lease. Once those are done with, you expect to receive the documents for your lease. If you own a small or medium-sized business, one to two years is good enough, but negotiate for an option to renew.
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The moment you’re done weighing over your length of the lease options, it’s time to think about the price. Although it will require a lot of time and effort, you definitely are going to explore your options in order to get a fair price. In the negotiation process, you never can negotiate for a great price on the rent if you don’t have numbers to bring with you to the table. Likewise, do not ever forget to talk about renewal and if the owner will throw in a provision on rent increases. This is to make sure there will be no surprises of an increase in the rent moving forward.
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Lastly, you should be vigilant enough not to get deceived by hidden costs. You should know by now that commercial leases can be described in two forms: a gross lease and a net lease. The former means all costs are already included in the agreed upon price. The latter meanwhile literally means that aside from the rent, you are to expect additional costs. Though a net lease is quite unfavorable to you, it actually is a very popular practice in commercial leases these days. For the most part, the costs that are not included in the negotiations are those related to the maintenance of the commercial property or space. Though it really becomes the responsibility of the tenant to cover maintenance costs, it doesn’t mean it needs to be hidden from you during the negotiation process.
Once you’re settled with all those issues above, make it a point to read the commercial lease at least a couple of times before you agree and sign it.