You’ve found a commercial rental location, you’ve probably completed your commercial rental application, and are now proudly on your way for applying for a real estate lease. Let’s look at several things you must keep in mind when you’re signing an office lease that will keep your business from sinking.
- Evaluate The Length Term
A term of 1-2 years is ideal for small businesses – as long as there is an option for renewal. At the end of the lease term, you could renew the lease should you like the commercial real estate rental. However, a shorter lease is favorable in case the rent in your region lowers or the location you selected deteriorates.
- Is The Rent Okay?
Ask yourself, in plain English, what it is you’re renting. Does the location have good hallways, working elevators, and spacious restrooms? Be sure to know what it is you are actually renting – so you can be sure that the price reflects everything you are getting.
- Maintenance And Repairs
There is a lot of commercial real estate for lease, but do you know who will maintain the premises of the real estate? Who will repair the premises (such as the heating systems, and air conditioning systems)? Will you or the landlord be responsible for the commercial property? A good lease agreement answers these questions clearly and spells them out so there is no confusion.
- Set Cost Parameters
Always remember to negotiate a percentage increase cap with the landlord. Later on, this will save you from being bit by a spike in rent cost in the future. Keep an eye out for a “use clause”, which means the tenant’s activities that are allowed on the premises will be defined.
- Look For Hidden Caps
Do you know the difference between a “gross lease” and a “net lease”? If not, it could spell the difference between paying the rent for your office on time… or forever being behind unforeseen bills. Gross lease means that all costs are included into the total – no additional fees. Net lease means there are extra costs to the price, in addition to what you pay for.
- Read All Clauses Carefully
Always read the terms of commercial property leases that come across your desk. You will be looking for specific clauses such as one that lets you pay one month’s rent, as opposed to paying the entire amount listed on the lease. This is because this clause gives you time, in the event of an eviction, to cure a default. Specific clauses will also give you leeway room to negotiate and reduce penalties that may occur for terminating the lease early.
Does your business need to put up signs on the property? Signs that are visible from the street often attract passing motorists and are a worthy investment. Sadly, many lease agreements prohibit this and must be discussed in addition to discussing contents insurance, rates, taxes, etc. Property taxes are particularly worth keeping an eye for, as they will determine whether your business will fail or relocate to another region.
Most leases lay out, in clear terms, which party will pay for improvements and if any modifications can be made to the commercial property. The office lease must also clearly address who owns said improvements when the lease expires. There are a lot more issues that need to be addressed, but what we’ve just discussed covers the basics of what to keep in mind when you’re signing an office lease.