How To Effectively Negotiate a Commercial Lease
While it may be a stretch to anyone’s budget, there’s no denying that hiring legal experts or business professionals during the negotiation process for a commercial lease is the best and most proven way of getting the most favorable terms. First things first, the decisions you make in terms of choosing a commercial space to lease is never as simple as that of the one you make when renting a house, property, or apartment, since it involves your business and the possibility of it making money or becoming stagnant.
However, you probably are esteemed enough to do the negotiating on your own, but it doesn’t mean we’re just going to let you do that without arming yourself with some tips on how to guarantee that the lease contract terms are in your favor.
First of all, be sure you evaluate the length of the lease based on what you agreed upon verbally and what’s written in the draft of the contract. The fact is there are three crucial steps you need to take in this juncture, including that of searching for the right location, completing the rental application, and then applying for the real estate lease. The moment those steps are done, you will then receive the forms for your lease. For small-sized business, it makes sense to stick to one or a couple of years with an option for renewal.
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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. Obviously, it’ll take a lot of time and effort to get the best rate possible, but you definitely will have enough of those if you really want a fair price. Keep in mind that there’s no way for you to be successful in the negotiating table if you haven’t done enough research on other possible commercial spaces to rent. Also, don’t forget to include in your discussion the renewal options, particularly on the issue of rent increases. This is to ensure you won’t be in for surprise in the form of a rent increase as you move forward.
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Finally, be on the lookout for 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 includes all the costs in the entire lease. The latter meanwhile literally means that aside from the rent, you are to expect additional costs. Although you might find it outrageous and deceiving, a net lease is actually a very common practice in many commercial leases today. The traditional costs that are typically not included in the initial negotiations is related to maintenance of the space or area. Know that even though you are most likely going to be responsible for the maintenance of the space, you still deserve to be informed about it during the negotiation process.
To cap it off, put in the effort to read the commercial lease several times and make sure you understand every word in it right before agreeing and signing.