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What concessions can you request when signing a commercial lease?

| Oct 14, 2020 | Real Estate |

The property that you use for your business will likely be one of your biggest expenses and liabilities associated with operations. It is important that you find facilities that meet all of your business’ needs.

Whether you need parking space for employees and customers, major sources of electricity for factory equipment or accessibility to a local highway, finding the right property and securing the lease for it can potentially make or break your business. However, even the ideal commercial property leased with suboptimal terms can cause a host of complications for you as the business owner.

As with any other contract, the commercial lease will usually come with certain terms that you can negotiate. Recognizing which terms matter the most to you and your business will help you secure the best possible contract terms for what will likely be one of your largest liabilities.

How flexible is the landlord with the length of the lease?

While residential leases often last for 12 months or sometimes only from month to month, commercial property leases typically last for years, sometimes including 5-year or 10-year terms. A commercial lease will lock you into a property because you have an obligation to pay the remaining balance of rent even if you move to a new facility or the business fails. Trying to negotiate more flexibility, especially as a startup or a rapidly growing company, could protect you from rent-related losses. 

Maintenance requirements and cam fees

Some commercial landlords pass all major building maintenance responsibilities directly to tenants. That would mean that you will have to upgrade the wiring, cover any major system failures and maintain the property without any investment from the landlord. You may be able to negotiate somewhat on this requirement, depending on the scope of your business and the scale of operations for your company.

It is also common for leases to include charges either at a flat rate or a percentage for the maintenance of shared systems, such as security and the parking lot. Depending on how much your company will need to use these resources, you may be able to push for a lower shared percentage of these fees as part of your lease.

Remember that negotiations often involve give and take for both parties, so you want to carefully consider what terms and what kinds of flexibility are the most important to your business. Getting help with negotiations and real estate contracts can help protect your company from a bad leasing decision leading to a loss.