Negotiate Commercial Lease

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Helping You Get a Fair Lease for Your Business

Because your lease will be one of your biggest fixed costs, it is critical that you not only get the best rental rate that you also have a stable lease agreement that will protect you from unreasonable rent hikes and fees during the course of your lease term and has reasonable terms and conditions.

For most businesses a commercial lease is about an immediate need. But, the benefits of having a real estate attorney help you negotiate the lease not only include helping you get a better deal right now, but also include future benefits.

Your attorney will help you make sure that you maintain maximum flexibility and that the increases in your rent and fees will be manageable. If you ever have issues with the landlord in the future, you will be able to go directly to the attorney that helped you by negotiating the lease to help resolve the problem.

Because we regularly, draft, review, negotiate, and litigate commercial lease agreements we know what provisions are good or bad for your business and their potential future impact and are fully prepared to help you negotiate a lease that is as in your best interest as possible.

A Commercial Lease Must Be Good for Your Business, Now and In the Future

Commercial leases are purposefully written to favor landlords. However, just because you are a tenant, doesn’t mean you don’t have bargaining power. We understand how to avoid traps and how to help you get the lease you need on the space you want for your business. Commercial leases are lengthy and highly technical. It is critical that you have someone on your side that speaks the language.

Many commercial leases are bad deals for tenants. Often landlords use the same forms for every tenant. However, you don’t have to accept the lease as written. We have helped businesses just like yours negotiate hundreds of commercial leases.

The most important thing for your business is to have a stable place of business. A real estate attorney will help you secure the right place for your business at the best rate possible.

Have an Attorney Negotiate a Commercial Lease

Having an attorney negotiate your commercial lease gives you a competitive edge. An attorney will be able to help you get a more favorable lease where your future costs will be more controlled and where your rights are protected.

Commercial real estate attorneys not only have an in depth knowledge about the way lease agreements are drafted, but they also understand how different clauses are likely to play out in court.

When you have an experienced attorney negotiate your lease you are not only making sure your due diligence on the lease is being taken care of, but you are also engaging in effective risk management because the lease your attorney negotiates will be less likely to end up at the center of a lengthy court battle.

When you are building a business you have a lot of different tasks that require your attention. Even if you have all of the skills to negotiate your own lease, it is not the best use of your valuable time.

A commercial real estate attorney is able to devote all of their efforts to commercial real estate matters. They will be much more focused on helping you get the best deal for your business than even you would be.

Letting an attorney negotiate your commercial lease is a smart business move.

How an Attorney Negotiates a Commercial Lease

During the course of the negotiation of a commercial lease your attorney is working to secure your desired rental space, protect your future legal and business interests, and to set the tone for your relationship with your landlord.

Typically a client will have a space that they are interested in leasing. They will have already seen the space and made sure it would be a good fit for their business.

They then retain an attorney to help them negotiate the commercial lease with the landlord or the property management company.

Most of the time, the landlord, or the landlord’s agent, will have a standard lease agreement they want you to sign. Even though many tenants may sign the lease agreement without questions, most of the actual terms of the lease are usually open to negotiation. This includes everything from the rent, the length of the lease, any additional fees, and common area maintenance to the cost of breaking the lease and who is responsible for the lease if the business closes.

Before an attorney begins negotiating the specifics of the lease, they will become familiar with your business and your goals. Your business may have specific needs when it comes to the lease. You may also have certain budgetary restrictions that the attorney needs to keep in mind. Once the attorney understands what issues are most important to you and what issues are non-negotiable, they can begin to engage with the landlord about the lease.

Depending on the situation, a real estate attorney could either begin the negotiation by submitting changes to the form lease agreement that the landlord uses or the attorney could begin with a letter describing the broad outlines of the lease you would like to sign.

Like all negotiations, there will be some back and forth between your lawyer and the landlord. Your lawyer will keep you up to date on the progress of the negotiations and may need your input on come specific offers from the landlord.

Once a general agreement has been reached, your attorney will usually offer to draft the lease agreement. Often landlords will be happy to have someone else create the agreement.

You will then be able to sign a lease agreement that protects your interests and has been fully vetted by your attorney.

Understanding the Mindset Of A Commercial Landlord

In addition to a strong of knowledge of the law and of your business, when negotiating a commercial lease it is important to understand the mindset of a commercial landlord.

The landlord is holding the property as an investment. Often the landlord does not own the property outright. The property is an investment for the landlord and there are regular recurring costs to maintain the property. Landlords hate vacancies. Not only do vacancies cut into their investment profits, but also if there are too many vacancies the property can quickly become expensive to own and operate.

However, even though landlords want to keep their property as fully rented as possible, they also have other considerations. Landlords want the leasing process to go as smoothly as possible. Every time a landlord has to deal with a tenant problem, it is costing them profits.

Landlords also want to make as much money per tenant as possible. This means sometimes landlord will push for the right in increase fees and rent as often as they can get away with. When your attorney is negotiating your lease their job is to press the landlord for the best deal possible as quickly as possible.

Often attorneys will be able to use the landlord’s desire to get a property occupied quickly by a steady, tenant that doesn’t cause trouble as leverage to get a better deal on rent, fees, or to insist on caps on the rate at which the landlord can increase the rent or any fees.

Meeting Your Business And Legal Needs

A commercial lease must meet both your company’s legal needs and your business needs. Often businesses focus on the business needs of the lease, but neglect to pay attention to potential legal issues.

It is common for businesses that are negotiating their own leases to be overly optimistic about how different lease terms will play out in the future.

Business needs and the commercial lease.

You need a lease to secure a space that will let you operate your business.

Different businesses will have different commercial space needs. A restaurant and a software company will have very different needs.

Beyond just the space, you need to secure a lease that your business can afford now and in the future. Almost all commercial leases have provisions for rent increases.

However, businesses often fail to fully appreciate just how much these rent increases may impact their business in the future. Instead they only focus on the immediate costs.

Another business issue when it comes to a commercial lease is the other fees and costs. You may be required to bear most of the maintenance costs of the area you have rented.

You need to make sure you have budgeted sufficient amounts of money to cover likely maintenance issues. A new building will be cheaper to maintain than an older building. You may also have to pay fees for the upkeep of common areas.

Legal needs and the commercial lease.

During the course of your lease term something will go wrong. The lease will spell out what your rights and obligations are when there is a problem. When you have an attorney negotiating your lease they will make sure the lease protects your interests and answers important questions.

Here are some common legal questions that a good commercial lease must answer:

  • What happens if the rent is late?
  • What happens if the landlord fails to maintain common areas?
  • How much notice must the landlord give before making repairs that may impact your business?
  • What types of tenants can the landlord put in around you?

Issues to Watch Out For in Commercial Leases

Part of this process is looking out for potential problems. Issues in commercial leases are usually either caused by vague language or by clauses that are give the landlord too much leverage of you. When your attorney is negotiating the lease they will be focusing on developing language that is precise. This will help you and your landlord avoid any future misunderstandings.

Often landlords want to try and put unreasonable limits on your ability to sublease your space. You want to maintain as much freedom as possible to sublease because it gives you more options as the size of your business changes. You can lease extra space to help cover your rent and you know that you control the extra space when you are ready to expand.

Another part of the commercial lease negotiation process is to make it clear that certain clauses are unacceptable. This includes unreasonable fees, language that gives landlords that ability to raise rental rates or fees without reasonable notice or limits. Your lawyer will ask for a record of the required fees for past years to make sure that the fees the landlord is charging match the fees described in the lease agreement and that the landlord has not been adding fees without the consent of the tenants.

Pitfalls of Negotiating a Commercial Lease Yourself

It is understandable that businesses want to keep their costs low. However, trying to save money by negotiating your own lease comes with some serious pitfalls.

Often businesses will find they would have saved money if they had retained a real estate attorney to negotiate the lease instead of trying to do themselves.

Because commercial leases are written with legal jargon, or terms of art, often even experienced business people will find that they misunderstand some of the terms in the lease. That simple misunderstanding could cost a business thousands of dollars, or more, a year.

If you are negotiating your own lease you may be tempted to do whatever it takes to close the deal fast so that you can get your business up and going in the new space. But, your desire to get started fast may mean you miss opportunities to save money or properly secure your legal rights.

Having an attorney negotiating your lease you have a set of unbiased eyes looking over every detail. This makes it easier to get the best deal and to avoid agreeing a deal that harms your business or locks you into unfavorable terms for many years.

Once you have signed a lease it can be extremely difficult, and expensive, to back out.

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Need help with a commercial lease? To find out more about how we can help you negotiate your next commercial lease, or renegotiate your current lease give us a call at (407) 259-2426 or click the button below to schedule a free consult.

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