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Common missteps in commercial lease negotiations

On Behalf of | Jan 17, 2017 | Commercial Real Estate |

Most people understand that businesses need a place to conduct their business. Therefore, signing a commercial lease is one of the most important decisions that a business will make. These often have significant financial and legal ramifications that people need to understand fully before committing. When negotiating a commercial lease, there are a few important factors that people should keep in mind to avoid making some of the common mistakes that can plague a business down the line. For more information, check out some of the most common mistakes in commercial lease negotiations below.

When businesses sign a long-term lease, ask the landlord for certain concessions

It’s no secret that landlords want their tenants to sign leases that can cover multiple years. This ensures that the landlord has a steady stream of income; however, the client is well within their rights to ask for concessions in return. Examples include free rent for a certain number of months, improved building integrity to decrease utility bills, or changing the flooring or lighting fixtures.

When considering leasing property for your business, you need to take the opportunity to negotiate terms that meet your specific situation. The time to do this is before you enter into any contractual agreement with the landlord, as you may be unable to revisit the lease later if you think of additional items or concessions that you need for your entity.

Do not negotiate in a time-sensitive situation

Many business owners are frantically looking for another place to conduct their business because they are eager to get started or have been evicted from a prior location. First of all, people should take time to calm their emotions. If they are flustered when negotiating with a landlord, the landlord will sense this and try to force an unfavorable deal. Furthermore, people who are negotiating in a panic do not have the proper frame of mind to fully understand the consequences of the different issues being considered. Don’t negotiate under pressure and try to avoid revealing any information about the state of mind to the landlord.

Ensure that there is always a way out

Many people forget that getting out of the lease is important due to the financial circumstances of the lease. For example, some businesses are looking to expand or move and need to move to a bigger place in a few years. This is difficult to do when locked into the lease. Make sure that the lease includes options to sublease, options to sell the business to someone else, and that the landlord cannot unreasonably withhold certain aspects of the lease from the client. This can provide business owners with an important way out.