How To Negotiate a Commercial Lease

Properties for lease
When you are looking for a place for your business, you'll likely ending up leasing it. But before you agree to the basic terms of the commercial lease that your landlord hands you, you should realize that there is some leeway when it comes to commercial leases. Here are some suggestions to help you negotiate a commercial lease that you can be happy with.

Step 1

Discuss the basic lease cost. The first topic you and your landlord need to discuss when negotiating a commercial lease is how much you will pay to rent the space. Usually, your monthly rent will be determined based on the square footage of the commercial space, calculated at a ‘per square foot' cost. So a 2000 sq. ft. space that rents at $5 a square foot would be $10,000 a month to lease. On top of this basic rental cost, you may also be required to pay for the maintenance of any common areas, like walkways, parking lots and restrooms. See if the landlord is negotiable on the cost of this maintenance, or if you can come to agreement on a rental price that includes common area maintenance (CAM). Most landlords are willing to concede in this area a little bit when it comes to negotiating a commercial lease.

Step 2

Ask what is included in the lease. When you are negotiating a commercial lease, make sure you get a written account of what services and fees will be covered in the lease. Determine who is responsible for paying additional costs associated with leasing the commercial space, and get it all in writing. These additional costs may include property taxes, utilities, garbage collection, insurance and repairs. The gross lease may not include these additional costs, so make sure you take into account the real cost of leasing a commercial space before committing to it.

Step 3

Determine who is responsible for the cost of improvements. You will likely want to make a commercial space your own before you move your business into it. Some landlords are willing to absorb the cost of reasonable upgrades since you are improving their properties. On the other hand, if the improvements are not necessary, you may be required to foot the entire bill. You should also discuss whether you need approval to make improvements to the commercial location, and whether you or the landlord will choose the contractor to do the work.

Step 4

Define the length of the lease. The next step to negotiating a commercial lease is to quickly discuss the terms (or length) of the lease. Most businesses opt for a 1-year lease until they are sure that their business is stable and will be around for the next few years. Others are comfortable with a 5-year lease, which they can usually negotiate at a reduced rate. (Landlords love to have long-term tenants, so they will cut the price if they know they can secure a tenant for a few years.)

Step 5

Cover other small details.  Finally, make sure that you haven't left any details out of your commercial lease negotiations. Did you discuss what signage will be acceptable? What happens if you need to relocate? Can you bring in a sub-lessee? All of these issues need to be address before you sign a commercial lease. As a final precaution, take a lease to your lawyer or attorney and have him review the agreement. You can never be too careful about signing a commercial lease agreement, and your lawyer will help you to recognize exactly what you are signing.


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