Essential Tips For Negotiating A Commercial Lease

If you are a company looking to open a new office, get retail space or do some other physical commercial activity, then you need to know how to negotiate a commercial lease agreement. Knowing what to do can ensure that you end up with favorable terms that will ensure your success even before you start a business.

The following are some of the things you should take note of when negotiating a commercial lease.

The Commercial Lease Term Length

You should have a long-term lease plan and be sure that the proposed lease fits your company’s goals. If your company is a start-up or a high growth company, you might want a shorter lease term because of the flexibility needed for that type of business.

If your organization is more established, you might want a commercial lease with a long-term to establish a stable and predictable cost metric and negotiate savings on the lease. This is because you are guaranteeing a long-term stream of income for the landlord.

Commercial Lease Exit Strategy

Your exit strategy is very important in instances of financial challenges, acquisition, or outgrowth of your lease space. This is especially important for young businesses or start-ups.

However, your expectations should be reasonable. This is because in the present real estate market, there are a lot of buyers. So, it might be hard to get an agreement with a right to cancel.

If your business is a heavily regulated one like a restaurant, bar, life science or healthcare company, you might need a contingency clause that delays the operation of the lease till you get regulatory approval. You should also have a right to cancel if you are unable to get the required regulatory approval.

Notice and Cure periods

Commercial landlords have a broad spectrum of legal rights and remedies they can use to protect themselves from tenants who are harmful to their business. Examples of these remedies include rent acceleration and enforcement costs, lease termination which the landlord can use whenever there is a default.

As a tenant, you should negotiate for grace periods, a right to get written notices of defaults, and reasonable opportunity to cure before a default is declared. A typical notice and cure period would provide a 3 to 5-day grace for you to pay the rent after receiving the landlord’s notice of default.

Assignment and subleasing

The right to assign and sublease the property is very essential in aiding the flexibility of your business. If the lease is silent in relation to transfer rights, you can assign or sublet your interest.

Most commercial leases have a provision that requires a landlord’s consent before a property can be assigned or subleased. You should make sure that the condition in the agreement does not give the landlord room for unreasonable delays in giving consent.

There are a lot of other things involved in a commercial lease agreement. To make sure you are on the safe side, get a commercial lawyer to guide you through the legal and negotiation process.