You’ve found great space for your business. The landlord provides you with a form commercial lease, and you start to review it. This is a list of the top 10 leasing negotiation tips for commercial tenants.
- Verify accuracy of square footage of premises; finding out several years into a lease that the square footage is – and rent should be – less than as stated in the lease rarely entitles a tenant to relief.
- Get a “drop dead” date for delivery of the premises (no tenant wants to, and few can, wait indefinitely for premises to be delivered).
- Broaden the “use” clause as much as reasonably possible; this will substantially increase your assignment and subletting rights.
- Endeavor to get extension options, and to have those options be transferable to an assignee or subtenant.
- Limit common area maintenance charges, insurance expenses, and real estate taxes to the extent possible, including (in California) requesting “Proposition 13 protection.”
- Get an “audit right” with respect to the landlord’s common area maintenance charges, insurance expenses, and real estate taxes.
- Negotiate alterations/surrender of premises provisions so that you are not required to remove alterations or improvements from the premises at the end of the lease term.
- Obtain a termination right if there is damage or destruction of the premises that the landlord cannot (or does not) repair within, say, 180 days from the date of the casualty.
- Request (or, better yet, require) a non-disturbance agreement from all lenders and ground lessors having an interest in the property; otherwise in the event of foreclosure, a lender or ground lessor whose interest pre-dates that of the tenant under the lease will have the right to terminate the lease.
- Ensure that all provisions of the letter of intent/lease proposal are accurately incorporated in the lease (often this is not the case).
Negotiating a commercial lease can be a complex (and daunting) process, and landlords generally have the “upper hand.” For further information, please contact Beau Simon.