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.

  1. 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.
  2. Get a “drop dead” date for delivery of the premises (no tenant wants to, and few can, wait indefinitely for premises to be delivered).
  3. Broaden the “use” clause as much as reasonably possible; this will substantially increase your assignment and subletting rights.
  4. Endeavor to get extension options, and to have those options be transferable to an assignee or subtenant.
  5. Limit common area maintenance charges, insurance expenses, and real estate taxes to the extent possible, including (in California) requesting “Proposition 13 protection.”
  6. Get an “audit right” with respect to the landlord’s common area maintenance charges, insurance expenses, and real estate taxes.
  7. 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.
  8. 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.
  9. 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.
  10. 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.

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