When a person or a business finds the ideal commercial space, the next step is lease negotiation. The commercial lease is far different from the more familiar residential lease or rental agreement. Expert advice is usually critical, for the tenant to avoid signing off on an unfavorable lease.
1
Summary of Terms
Get the landlord to provide a written summary of the basic lease terms. This is sometimes done with a Letter of Intent, or it can be a simple memorandum. Either way, it should be a non-binding overview of primary elements, such as rent amount, starting date, length of lease, size of lease space, charges for utilities, charges for common areas, charges for taxes and insurance, and who covers maintenance. It should also clearly define the lease remises as to size, location, and address.
2
Negotiate additional terms
Once the basics are tentatively agreed on, consider whether to ask for additional terms, such as renewal options, non-competition (preventing your landlord from lease nearby space to a competitor), early termination options (allowing the tenant to pay a fee to terminate the lease early), assigned parking spaces, etc.
3
Beware of Personal Guarantee!
Most landlords will require that a lease to a small business be personally guaranteed by all the owners. However, it doesn't hurt to request that this be deleted. If the landlord insists on a "PG", carefully consider the "worst case scenario" and how much personal liability you can tolerate.
4
Tenant Improvements
Consider asking the landlord to pay for certain improvements to the premises, to be constructed before you move in. These could be installing walls and doors for offices, counters, closets, paint, carpet, electrical wiring, hi-speed cabling, and lighting. Most landlords will provide at least some of this, and others limit the tenant improvements to an allowance of a certain dollar amount per square foot in the leased space. In any event, pin down the landlord as to exactly what is "landlord's work". This is often spelled out in a Work Letter, to be attached to the written lease.
5
Obtain the proposed form of lease
Ask that the landlord provide an advance copy of the proposed form of lease, so that you and your attorney can review it for additional provision that go beyond the basic negotiations. Watch for onerous provisions concerning late payment penalties, use of tenant's security deposit without advance notice, billings for common area charges without an accounting of tenant's fair share, etc.
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