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How to Negotiate the Best Commercial Lease

In order to negotiate for a commercial lease that is fair and reasonable, there are a few things that you need to keep in mind. The best commercial leases will not be accepted without at least a few negotiations involved, so it is imperative to be able to negotiate fairly with possible tenants. Here are the things that will typically be up for discussion in a commercial lease and how to come to the table prepared to negotiate.

Type of lease

The first thing that will be considered when negotiating a commercial lease is what type of lease the tenant is being asked to sign. There are many types of commercial leases, and they all detail a different level of involvement from the owner.

The most important thing that will be discussed about the type of lease you are presenting to tenants is what costs are covered in the lease and which are not. The most important costs that will be either included or excluded in the lease are who is responsible for maintenance, insurance, operating expenses and property taxes. It is important to make a note of what is covered and what is not and make sure that the type of lease will be satisfactory to both the tenant and the owner.

The length of your lease

The next important topic when negotiating a commercial lease is the length of time that the lease is for. Often, small businesses will do better with a short 1-2-year lease, as this allows for flexibility within a business and an insurance that tenants will not be obligated to stay if things are not going well. When your tenants are doing well, you are doing well too. This makes it imperative to ensure that a lease will be the right length of time for your tenant.

Another important thing to consider when signing a long lease is “out” clauses. You may decide to include out clauses included in your lease, including the option to sublease, the option to sell the business and assign or a kick-out clause. A kick-out clause may benefit a new business or a business that is trying out a new business model or style. The clause essentially allows a tenant to get out of a lease if they are falling below a specified financial threshold, which may be something an owner would want to protect their own property. If none of these clauses are built into your lease, you may want to consider adding them.

Negotiate A Commercial Lease

It is very important to do market research to determine the average asking price for a commercial lease in your area and use this during negotiations. Make sure that the increase is going to be something that a business can afford in the future.

Staying in the know of rent prices for comparable commercial real estate in the area is important for every owner. If you do not keep up to date on what other businesses are paying in the area, you could miss out on a good tenant.It is up to you to find the best lease for your tenants and your business. Make sure to add things that you believe are essential to your business and will help you to find the right tenant for your space. Understand that the negotiations are an important part of the process and that being fair and reasonable will likely lead to an agreeable relationship with your future tenants.