Ten Things You Must Know Before You Sign a Business Lease

By Julie King

http://www.canadaone.com/ezine/june00/business_leases.html

1. Take time and do your homework. If you are rushed you won't be able to properly assess the marketplace to ensure that the needs of your business are met when you're signing a deal. If you have a lease renewal coming up, give yourself lots of time to renegotiate. Then if you can't come to agreeable terms or decide it's time to move to a different space, you have plenty of time to get everything in order for the transition.
2. Business leases are not like dwelling rentals. Business leases are totally different from personal dwelling rentals. In a personal dwelling rental, costs are usually restricted to a set monthly price plus specified expenses such as heat and water. The landlord is responsible for repair expenses, and the government is there to protect the rights of the tenant. With business leases, there may be many other costs above the base lease price that will be charged back to the tenants. Outside of your written lease agreement, there is nothing like the protection offered to people renting home space. Before negotiating a lease, take time to understand what costs - above the basic lease costs – the landlord will charge you over the year. Recognize that as a business tenant you won't be afforded the same legal protections offered to personal dwelling tenants. Know what actions the lessor can legally take under certain situations, such as the late payment of rent.
3. Negotiate. Landlords and lease brokers will expect you to negotiate, but would love for you to take the first deal that they offer you, because they will have built in room to move downward. Doing anything less than negotiating will likely mean that you pay more, or that critical clauses to protect your best interests are left out of the lease agreement. In the negotiation process it helps to be prepared and to not appear too eager. Put your pride aside and be ready to negotiate the best possible lease deal. Start low, ask for extras such as free rent, and ask for more than you hope to get. If your first offer is accepted, you didn't start low enough!
4. If this is your first time, practice. Talk to different landlords, ask lots of questions, inquire about different incentives, and try to get a feel for the process of negotiating a lease. This process will help you understand the market, and will help you get ready to enter into actual negotiations once you have an understanding of what's available, what you need, and what you can ask for during negotiations.
5. Get expert feedback. As you move through the negotiation process, consult someone with the expertise (likely a lawyer, accountant or lease consultant) who can act in your best interests. An expert should be able to help you include clauses that will benefit your business, tell you what to ask for during negotiations, and protect you from signing a lease agreement that could cost you money and problems in the long run. They will help you answer questions such as: does the deal look like it could cause your business to incur any unexpected costs? Are operating costs shared based on the percentage of space you take up in the overall building, or are they based on the number of tenants in the building, even if there are expenses incurred for vacant units? Does the deal allow you to reduce the cost of your rental rate if you renegotiate after the lease expires? Do you have first right to lease your space on a long term basis if you currently have a month-to-month lease? There are many questions to ask; an expert can anticipate the questions and ensure that you are protected from making costly mistakes.
6. Understand rental rates ...........READ MORE