Top Items Businesses Miss Negotiating in Their Commercial Leases

Securing an optimal commercial lease agreement is crucial for businesses of all sizes, as it lays the foundation for their physical operations and financial stability. However, many businesses, particularly those new to the process, can inadvertently overlook critical negotiation points, leading to unforeseen costs and limitations down the line. To ensure a professional and advantageous lease, here are some key areas where businesses often miss opportunities for negotiation:
Financial:

• Rent & Escalations: Beyond the initial base rent, carefully examine escalation clauses, percentage rent structures (if applicable), and rent commencement dates. Aim for a competitive base rent, capped or predictable escalations, and delayed rent until the space is fully operational.  
• Operating Expenses (OpEx): Negotiate for transparency and control over Common Area Maintenance (CAM) charges, utilities, property taxes, and other expenses. Seek to cap CAM charges, exclude specific items, and establish clear billing methods.
• Personal Guarantees: If requested, attempt to remove this clause or limit its scope (duration, amount) to protect your personal finances from unintended liability.

Term & Termination:

• Lease Term: Analyze your business needs and market conditions. While longer leases offer stability, shorter terms provide flexibility for future adjustments. Negotiate for renewal options or early termination under specified circumstances.
• Default & Termination Clauses: Thoroughly understand the conditions that can trigger lease termination and associated penalties. Advocate for reasonable grace periods and clear communication procedures before termination action.

Space & Repairs:

• Premises Condition: Before signing, meticulously document any existing issues with the space. Negotiate for the landlord to address them prior to occupancy or allocate funds for repairs within the lease agreement.
• Renovations & Alterations: Secure written approval for planned renovations and clarify who bears the costs.Negotiate for limitations on the landlord's ability to unreasonably deny alterations necessary for your business operations.
• Repair & Maintenance Responsibilities: Clearly define who is responsible for repairs and maintenance of the property, including common areas. Negotiate for response timeframes and dispute resolution procedures.

Other Important Clauses:

• Exclusivity Clauses: For relevant businesses, negotiate clauses that prevent the landlord from leasing nearby spaces to your direct competitors.
• Assignment & Subletting: Understand the conditions under which you can assign or sublet the lease. Negotiate for flexibility in these situations, especially if your business model or needs evolve.
• Force Majeure Clause: This clause outlines how unforeseen events like natural disasters or pandemics affect the lease agreement. Negotiate for fair terms that consider the interests of both parties.

Additional Tips:

• Market Research: Gain a comprehensive understanding of local market rental rates and typical lease terms for comparable businesses.
• Professional Guidance: Consider consulting with a lawyer or commercial real estate broker experienced in lease negotiations, especially for complex situations.
• Thorough Review: Never rush into signing. Scrutinize the entire lease document carefully, ask questions, and clarify any confusing terms before finalizing the agreement.

By prioritizing these key areas and engaging in proactive negotiation, businesses can secure a well-structured commercial lease agreement that aligns with their specific needs and fosters long-term success. Remember, every lease is unique, and effective negotiation strategies will vary based on the individual circumstances. Don't hesitate to call, email, or text us for guidance to ensure you secure the best possible terms for your business.