Securing the right rental space here in Orange County can be a challenge. After what may be an exhaustive search, a commercial tenant must then begin the arduous and often unfamiliar process of negotiating the terms of a lease. More than likely, the landlord has done this numerous times, and probably already has built a library of forms for nearly every situation.
It may seem like a good idea to rely on the landlord’s forms, but more often than not, those forms provide more benefit to the property owner than they do to the tenant. The forms may provide a good starting point, but it may be a mistake not to read the fine print and negotiate better terms for the commercial tenant. One area where many tenants get into trouble is their portion of the property’s operating costs.
It is perfectly reasonable to ask a prospective landlord to cap the costs the tenant will be responsible for when it comes to operating, occupancy and common area maintenance. In many cases, these costs can be capped at anywhere between 5 and 10 percent per year, but this may still be cost prohibitive. This is often an area of intense negotiations when leasing commercial property. Owners do not want to be saddled with the majority of the costs, and tenants do not want to pay more than their fair share.
A commercial tenant may fear losing the rental space, which may be in a prime location, for not accepting the property owner’s first, second or even third offer regarding operating costs. However, even the best location can doom a business before it starts if a landlord can assess ever-rising amounts of operating costs on the tenant. There is no guarantee that an Orange County location will provide the business traffic needed in order to cover the requirements of an inadequately negotiated commercial lease agreement.
Source: exclusive.multibriefs.com, “Negotiating commercial leases: Cap your operating costs“, Dale Willerton and Jeff Grandfield, April 26, 2018
