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Tuesday, May 28, 2019

Five Tips for Negotiating Your Next Commercial Lease

Despite what people may tell you, just about everything in life is negotiable. This is particularly true in the world of commercial real estate. Commercial lease agreements obligating your business to pay a hefty sum in rent each month, but they also include many other critical terms regarding the use of the leased space. Nearly every one of these terms can be negotiated, and a good real estate attorney will know exactly what to look for when helping you negotiate a commercial lease.  

When it comes right down to it, there's no substitution for expert legal advice. Before entering into your next commercial lease agreement, be sure to reach out to a local real estate attorney who can help you make sure you're getting the best of the bargain. Until then, here are a few things to keep in mind for negotiating your next commercial lease.       

 

  1. Research Comparable Property Values

    If you found the perfect space for your office or retail shop, you may feel like it's priceless. Regardless, the fact of the matter remains a property's value is heavily impacted by what other property in the area is worth.. A local realtor or real estate attorney can provide invaluable insider knowledge into the commercial real estate market in a particular area.

    At the negotiating table, hard facts are your most effective allies. There's no excuse for going into a negotiation unprepared, so be sure to reach out to somebody who knows the market. If you can’t, be sure to at least research local commercial real estate market values before walking into your commercial lease negotiation. There are many online tools available that can help business owners pin down comparable property values in their selected areas - but don't make the pitfall of attempting to go it alone.

     

  2. Get a Break on Fees and Costs

    For many of us, reviewing a lease agreement involves flipping to the page that names the rental price in scrutinizing the number listed. In many ways this makes sense - after all, lease payments can be among the most significant expenses for new business owners.  But the fact of the matter is that there are many non-rent fees and use restrictions that can have a significant economic impact on a commercial tenant. For example, if your commercial lease stipulates the tenant is responsible for utilities, consider asking your landlord to take on that expense. Likewise, if your company is responsible for paying maintenance fees, ask the building owner to waive common maintenance costs instead of reducing rent. After all, you never know unless you ask!

     

  3. Focus on Tenant Rights

    Running a successful business requires focusing on the bottom line. However, when negotiating for your new space, be sure to also consider the nonfinancial clauses in the commercial lease. For example, you may want to negotiate the right for your business to sublease the space. Likewise, consider asking your landlord to include a noncompete agreement or exclusivity clause in the lease, which can prevent someone from opening a competing business in the same location.  Shrewdly negotiating these terms may not have any immediate financial benefits, but it helps your business hedge risk moving forward.  

     

  4. Know What Concessions You’re Willing to Offer

    As exciting as a “deal or no deal” style negotiation may be, a good negotiator sits down at the negotiating table knowing what concessions she's ready to offer. This is the art of negotiation - give a little, get a little (or a lot if you're really good at it). In many areas, commercial landlords are very eager to fill retail and office spaces. So, if you're willing to offer something to entice them, they may be willing to sweeten the deal. Instead of requesting a waiver of maintenance fees, consider offering an additional payment for private parking or privileged use of common areas. If you're interested in making improvements to the facility, ask your landlord whether or not you can get a break on rent for tenant improvements. However, making concessions to a practiced commercial real estate landlord can be a slippery slope, and as a result some business owners make big mistakes when negotiating for their office or retail space. Thus, the best possible advice for negotiating a commercial lease should come from a local real estate attorney   

     

  5. Hire a Local Real Estate Attorney

It's easy for a budding entrepreneur to believe that entering into a commercial lease is just like renting an apartment. In fact, nothing could be further from the truth. Commercial lease agreements tend to be very complex, and there’s a lot that an effective negotiator needs to know before finalizing such an important agreement. They typically include a number of fees, restrictions, and obligations that residential tenants never have to deal with. Furthermore - unlike a typical residential lease that is renewed year-after-year - the standard commercial lease runs for a period of 20 years.  This makes the execution of a commercial lease a much more substantial commitment than most residential leases, and this commitment should never be taken lightly. To make sure you are doing what's best for your business, hire a local real estate attorney to help you negotiate your next commercial lease.

If you're in the Chicago area, there is no better legal assistance then that offered by the experts at M&A Law Firm. The skilled real estate attorneys at M&A have experience in both residential and commercial lease negotiations across the Great Lakes region, and we would love to help your growing business build the foundation that it needs to achieve lasting success. 



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