Business Owners May Negotiate Lease Terms Before Signing

Small business owners often think that a landlord’s lease is final and that they must take what’s presented to them without debate. However, most landlords are willing to work with business owners because they do not want a vacancy in their shopping center, office building, or other property. This is where business owners may negotiate lease terms before signing.

What happens after you find a space for your business?

Once the business owner has a property in mind, contacting the landlord or his or her in-house leasing agent or broker is the first step. The landlord will then draft a letter of intent, which is a short letter that contains the property’s base rent, move-in date, and other stipulations. If the tenant agrees to those terms, the landlord will then deliver a commercial lease. If the landlord or tenant does not agree to the lease, often the terms of the lease can be negotiated.

Terms of the lease

Many business owners are surprised to learn that they can negotiate certain terms out of a lease as well as into the lease. Business owners should keep this in mind when discussing particular lease terms with their potential landlord.

Commercial lease terms typically run anywhere from 5 to 20 years. Before deciding on the term length, business owners should consider various elements including whether this is his or her first venture, whether the business is a franchise, and other factors.

Important provisions

The commercial lease will contain several important lease provisions, and every business owner should carefully examine the lease before signing, preferably with the help of an attorney who specializes in business and real estate law. Below are only a few of the common provisions that tenants should be aware of before signing a lease.

• Relocation right allows the landlord the ability to move a tenant’s business to another space if certain conditions exist. This can be devastating to the business, because the ability to be seen is a premium factor in commercial leasing, and a relocation right can take away from business owners.
• Tenant exclusive often limits the use of a tenant’s business. As an example, if you own a hair salon and you intend to sell hair care products you may be limited if another tenant in the shopping center – perhaps a beauty supply store – has negotiated a clause to limit competition.
• Maintenance and repair clauses could include anything from snow removal to landscaping and repaving. Business owners should be aware that, unlike residential tenants, they are most often responsible for costs.
• Hidden fees are often tucked away in the lease and often leave business owners paying monthly on expenses that could have been cut had the negotiation taken place at the beginning of the process.

Help is available

Commercial lease negotiation is best accomplished with the help of an attorney. The business and real estate attorneys at O’Reilly Rancilio represent both landlords and tenants with lease negotiation and more. For more information, please call 586-726-1000 or visit our website.