How to effectively negotiate a commercial lease

On Behalf of | Nov 10, 2021 | Commercial Real Estate

Rent can be one of the biggest expenses for your business. However, many business owners sign a lease without reviewing it, unaware that leases are generally open to negotiation. Others operate without a lease altogether, exposing themselves to the risk of eviction with little notice.

Below are some tips that may come in handy before you commit your business to a lease agreement.

Understand all the costs

It is advisable to review the incidentals you are being asked to pay for to ensure that the total cost is in line with your budget. Any future increments to these costs or the base rent should be specified. If they are not, do not hesitate to ask for clarification.

Check market rents

Compare the rent you are being asked to pay to the going market rates. It can help you negotiate for a lower amount if what you are being asked to pay is way higher than the neighborhood rates.

Do your research

You might want to gather information about the property on things like the building’s neighbors and tenant mix. Ascertain whether they are compatible with your business and also look out for competitors. Engage other businesses around the area and find out if there are any issues that may affect your operations.

Review the termination and renewal conditions

Make sure you are aware of the circumstances under which the lease may be terminated or renewed. It will help plan for the future and give you peace of mind when you know where things stand regarding these two critical aspects of a lease agreement.

Lastly, do not be quick to sign. Given that the lease agreement is legally binding to both parties take your time to ensure everything is clear to avoid any disputes along the way.