In our day-to-day living, especially in the business world, negotiation has become a vital part of obtaining better deals and ensures that everyone is satisfied, or an agreement is reached between parties.

How to Negotiate a Commercial Lease

Negotiation involves various stages starting from preparation, discussion, goal clarification, win-win objective, agreement, and finally implementation.

A legally binding contract between a landlord and a business tenant is known as a commercial lease.

The tenant has the right to use the property for commercial purposes for a specific period concerning the terms and conditions set in the lease and pay money to the landlord as rent.

The rights and responsibilities of both the tenant and landlord are stated in the lease and have to be adhered to during the period of the lease.

A Commercial Lease and a Residential Lease

A commercial lease differs from a residential one in that, in a residential lease, one rents a flat or property for residential use. A commercial lease offers a great chance for negotiation compared to a residential lease, and also involves parties that are business-minded. The tenant leases the property for commercial or business activity.

All commercial leases are documented, unlike oral lease agreements which fail to offer proof, hence being difficult to enforce.

Provisions in a Commercial Lease

Generally, a commercial lease covers the following factors:

• Address of the property
• Type of property being leased
• Security deposit provisions
• Period of tenancy and the terms of the lease if it is fixed or renewable after a specified time
• Amount of rent and payment date
• Commercial activities are permitted to be carried out on the premises or property.
• Whether the property can be sublet
• Factors that can lead to termination of a tenancy

Factors to Consider When Negotiating a Commercial Lease

Always Consider Acquiring the Services of a Lawyer

In the scenario of negotiating a commercial lease, both parties should consider involving a commercial lawyer, as this ensures their interests are protected.

A lawyer will also ensure that you are not blindsided in the negotiation process and will also explain terms that may be challenging to either party since leases are complex at times.

Assess the Needs of the Business and the Cost Involved

As an entrepreneur, one has to consider both long- and short-term budget needs. Therefore, you should research the type of lease that would be beneficial to the business, considering your business’s goals and current and future space needs.

A businessperson will be able to decide whether he would require a longer or shorter lease depending on their research prior to negotiating a lease.

You should consider the incidentals you are being asked to pay for in relation to your budget, with clear reasons being provided in case of changes in the later and base rent.

Compare the Current Market Rent Rates

Always consider the current market rates in the location where you plan to set up your business and acquire a commercial lease.

Beware of current market rates by doing research and also asking around to help one negotiate for a considerable amount since you will have knowledge of the rent rates in the region.

Gather Information About the Property

Legal information describing the property will be stated in the lease agreement outlining the identification in legal terms of the real estate and legal transactions which can be in a land registry form.

Certain factors such as fixtures like a toilet and leasehold improvements have to be considered too.

The landlord’s reputation is also a critical factor to consider. Check and inquire from current tenants and realtors about their relationship with the landlord and be on the lookout for any red flags.

Consider the surroundings and also other tenants or neighbors and if they are potential customers and compatible with your business.

Engage other local businesses in the area and find out about the business climate of the region, property, or building in question where you plan to obtain a lease.

This may influence the commercial lease rates and help you bargain in the negotiation process.

Lease Options Considerations

In most cases, rent on commercial property is payable in advance in a quarterly period. The type of lease dictates the costs covered.

Base rent and all incidentals are catered for in a gross rent lease which is payable in terms of a single amount to the landlord.

It factors costs including maintenance, insurance, utilities, and property tax just to mention a few.

The minimum amount of rent that can be paid to the landlord and set in the lease with the exemption of other additional operating costs and percentage rents is referred to as base rent.

In FRI (Full Repairing and Insuring) leases, the tenant must cater for all insurance, maintenance, and repair costs on the property.

Percentage Lease involves the tenant paying a fixed base rent together with a percentage of their gross income as agreed upon by the landlord, mostly practiced in shopping centers.

A net lease is another type of lease and is the case where the tenant foots some incidentals directly and is known to result in lower rental rates.

Never be in a hurry to sign a commercial lease and always beware of the terms that can lead to the termination of the lease.

In commercial lease negotiations, always consider the terms of termination of the lease, the budget you have in mind, and the surroundings. Never be in a hurry to sign— involve a Houston Commercial Lease Lawyer Review. Only sign when you are completely comfortable with the lease agreement.

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