Negotiating Rent of a Commercial Property

When negotiating commercial rent lease clauses, you should investigate rents for comparable space so you have an idea what you should be paying.   A real estate broker can give you the information you need.  You want to make sure you can afford  the rent.  Also you should consider the lease term to make sure it is not too long in case your business grows faster than anticipated or you are not happy with the location or other lease terms.  Negotiating a shorter term lease with options to renew may be a better idea.  It is also a good idea to talk to a commercial real estate attorney before you enter into a commercial lease.

Favorable Terms

Most commercial leases are favorable to landlords.  You should try to negotiate favorable commercial rent lease terms such as asking for a rent reduction or capping the amount of each year’s rental increase.  If you can get your landlord to exclude a rent increase the first year even better.  You should also find out what your rent includes, and what you are responsible for. Items to consider are:

• Utilities
• Repairs
• Taxes
• Insurance
• Maintenance

Keeping costs down should be your primary focus.  Sometimes it may be better to pay a higher gross lease which includes all these costs.  In a net lease, you pay for costs separately from your rent.

Other Important Clauses to Negotiate 

Besides negotiating rent, there are other important clauses that you want to include in your commercial lease such as tenant improvements and assignment and sublet clauses.  Depending on your business needs, you may need improvements that you might want to ask your landlord to pay for if you are agreeable to signing a longer lease term.   You want the freedom to be able to assign or sublet your space in case your business needs change and you need to downsize or you need more space and have to move to another property.  It’s much easier to decide these issues when you initially negotiate your commercial lease, then to decide later when your circumstances change.  Your landlord may not be agreeable to making changes later on.

Speak with an Attorney

There are so many complicated issues when you enter into a commercial lease that you should speak with an attorney to find out the best negotiating strategy for your business needs.  A commercial real estate attorney is an expert at negotiating commercial real estate leases, and can review your lease and make suggestions on how to make lease terms more favorable to your needs.