Tips for Negotiating a Commercial Lease

If you want to start a business, you will most likely need a commercial lease. Even if you already have a lease going, you might be interested to know how to negotiate a better one next time. And that is what we are going to teach you in this article, the fine art of negotiating a commercial lease! There are five easy steps you need to follow and we will walk you through them all. So, without further ado, let us continue to the steps.

How to do it?

There are multiple steps in negotiation and we will go over all of them. Do note that you do not need to do these steps in any particular order. Some leases will be even more complicated than what these steps can prepare you for, but you will have a great understanding in any case. So, when negotiating a commercial lease, this is what you need to do:

  • Assess the length of the lease
  • Research and compare rents
  • Search for hidden costs
  • Ask for favorable clauses
  • Look into termination clause closely
Negotiating a commercial lease - Read before signing
Signing the lease comes at the last place!

Assess the length of the lease

This one is pretty straightforward and obvious, but make sure not to forget it! You will always get a better deal if you are willing to commit for longer periods of time and you need to capitalize on that. Some of the owners will try to slap you with a multiple-year lease and never even mention it! Or maybe mention it in passing, so you forget. You already arranged for furniture movers NJ and everything, and it turns out the lease is a bad one!

In any case, you need not fall into a trap, if there is one. Simply checking what is the duration and if it works out for you will do the trick. Also, you need to carefully evaluate your business needs. Do you expect any major upsets or changes? If so, perhaps you will be better served with a shorter lease. And so on. You also need to include any commercial real estate trends in NJ, when planning, as well. All in all, make sure that the length of the lease is in accordance with your plans.

Research and compare rents

Part of this one you need to do before you even get to the actual negotiations. Do your homework, do the research about what are the rents like in the area, before you start packing your office. That way you will have great bargaining information and be able to negotiate a better lease. Write down all of that information on a piece of paper, perhaps in a notebook, and carry it with you. When you are at the negotiating table, negotiating a commercial lease, you want to have as many advantages as you can. This piece of information gives you power on several fronts. First, you have the pertinent information at hand. Second, the other party will view you as someone who came prepared. All of which favors you.

Search for hidden costs

This one is a bit tricky, and best done in the comfort of your own premises. Before you sign a lease, ask to have at least some time to consider. The best way is to give the document to a lawyer but it is not really necessary. Some lease documents are quite long so you want to read them in comfort. That means taking them to your home and looking at them carefully. If there are any hidden costs, such as obscure maintenance works or the like, you will be able to spot them. Most of the time, such items are listed for everyone to see but buried among some other text. However, with careful reading, you will be able to find them all!

graph chart with "Analysis" written over it
You need to do your homework! Analyze everything before signing!

Ask for favorable clauses

All the lease agreements are modifiable. If your landlord is completely unwilling to modify any parts of the lease, you should ask yourself if that is what you are willing to deal with. But, landlords are usually quite forthcoming on this matter. For example, you can ask to be able to sublease a property, enabling you to have some safety should you need to relocate or even close your business.

There are many clauses that you can add, and they all depend on what you need. Everything can be added to a lease if both parties are willing. Some of the common ones are the non-competing clause, which says that the owner can not rent out space to businesses that are same, or possibly similar, to your own. This way you can protect your business.

Another one of useful clauses to negotiate can be a restriction clause. This one prevents your landlord from renting out commercial space to any businesses that are similar to yours. Then there is a co-tenancy clause. This particular clause will allow you to break your lease if another tenant leaves the premises.  There are many other favorable clauses that you can get when negotiating a commercial lease, you just need to either do some research or be creative. The sky is the limit!

Every business has its own quirks and needs and you need to carefully evaluate the ones that apply to your business. Do not be afraid to ask for things to be added to the lease. In fact, when negotiating a commercial lease, the most important thing is not to be afraid! Ask for everything, see how much you can get! If it does not work, at least you will know where you stand!

Negotiating a Commercial Lease – look into termination clause closely

And the last bit of advice concerns the termination clause. This one might be the most important one of the lot! You see, when everything seems perfect from the start and there are no bad things about the lease, it is easy to overlook the termination clause. And this is a huge mistake. Often enough, the termination clauses are the ones that make the money for the owners. You need to make sure that if things go bad for you that you can exit safely and fast. It is always a good idea to read up on lease termination, so you know what you are in for.

Books on a shelf
Make sure to read everything, right to the termination clause!

Hiring a Professional Moving Company

After successfully negotiating a commercial lease, you will need to move in. And this is where you might need the help of a professional moving company. The best one, obviously, is Blue Bell Relocation Service NJ. Make sure to contact us, get an extremely accurate estimate and we will take it from there!

Negotiating a Commercial Lease – Five Easy Steps

When you get to the process of negotiation, you need to have all the following steps in mind:

  • What is the duration of the lease?
  • Is it comparable to similar leases?
  • Are there any hidden costs?
  • Can I get any favorable clauses?
  • How does the termination clause look like?
A timepiece on a desk
The duration of the lease is one of the most important terms.

Yes, they are both questions and steps! By going through them in order, and answering all of them, you will have a clear image of what kind of a lease you are dealing with. Often you will just walk out after just two or three steps because you are not satisfied with the answers.  You see, most of the people do not bother asking these questions, they just assume “oh, its just a lease” and think that everything is going to be alright. Sometimes you will get lucky and all that needs to be done is call your Short Hills movers and move in, but that is usually not the case.

Usually, that is a good way to get scammed/walked over.

However, just asking these questions does not mean much if you do not know what to do with the answers. Therefore, we will extrapolate a bit on each of these.

Negotiating a commercial lease – the duration

This is a term that you can usually choose for yourself, once you finished choosing your location and applied for a real estate lease. Depending on the nature of your business, it can go from a year to a century. Most small businesses start with a lease of one or two years, though. Make sure to have the option to renew, as well. One or two years are usually the best option because you are not resigning yourself for too long and if the going is good, you can always renew.

However, if you are dependant on that exact location for your business, you need to negotiate a lease that lasts longer. Or perhaps it is expected that the rents are going up in the future. These are the cases where you will want to nail down the lease agreement for quite some time.

Is it comparable to other rents?

Perhaps the most important part of a commercial lease is the amount that you need to pay per month. So, do not be lazy, do some homework! Research a bit on how much other businesses are paying for leases in your area. While you may not get exact information, you will at least have a clearer picture once you’re done with it. Your movers Glen Rock may offer some assistance in this matter, too. This will give you negotiating power and you will be able to come to a better deal. You will be able to balance rent increases with the initial ones and by having knowledge about the similar rents, you will avoid many mistakes.

How about hidden costs?

If you never looked at a lease agreement, you may not know that there are two major types of leases. “Gross” lease and “Net” lease.  A gross lease includes every single cost in your rent and is considerably more expensive. A net lease makes you responsible for all the other costs, as specified in the lease agreement. Usually, you are looking at things such as upkeep or maintenance.

Now, this can be really tricky at times. If your company is responsible for maintenance, there are about a million things that can go wrong. You need to carefully examine everything that you will be taking care of, so you know how much it will cost you, approximately. Make sure you track all the commercial trends, as well. For example, let’s say that you are responsible for maintaining fire extinguishers. You think “oh, that is fine, not much to do, sign the lease”. And then you figure out that someone is demolishing fire extinguishers on a regular basis. Your costs go way up.

Bottom line, always investigate the hidden costs!

Stack of dollar bills under shiny bricks
Not everything is colorful and shiny. Look out for hidden costs!

The Termination Clause

This is something that you need to check carefully and thoroughly. Read the parts that cover the termination of the lease several times. Make sure you understand the terms perfectly. Ideally, you need to have several clauses and terms that allow you an easier time should problems arise. For example, you want to have a clause that gives you ample time to pay before you get evicted. And you should agree on what the penalties for early termination will be. All in all, this part of the lease is quite flexible and you need to make sure that it is in line with your needs.

Hand drawing on paper while Negotiating a Commercial Lease
Termination needs to be clear and concise.

In Conclusion

The most important thing about negotiating a commercial lease is to read the whole document and to understand it. You need to know what benefits you are getting and what are your responsibilities. A commercial lease can be changed and it should be changed, according to your needs. There is no one-size-fits-all when it comes to commercial leases!

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