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What terms are negotiable in a commercial lease?

9/5/2015 | Real Estate Blog

In our earlier post, we focused on the terms of a commercial lease. As we mentioned, negotiating a commercial lease is not only an acceptable tactic, but it is almost expected that a business owner will attempt to negotiate a better deal. 

There are many terms to consider before signing a lease. And while rent and rent increases must certainly be addressed, business owners will also want to pay close attention to the length of the lease and any information related to how improvements will be paid. Remember, these terms may also be negotiable. 

In talking about terms, understand that from the landlord’s standpoint, the preference may be for a long-term lease. From the property owner’s point of view, having a long-term lease provides financial security as it means he or she will not need to worry about having to find a new tenant any time soon. This being said, agreeing to a long-term lease may give a business owner more negotiating power.

Of course, though, a long-term lease may not always be in the business owner’s best interest, especially for newer businesses that are not 100 percent sure of their profitability. By signing a long-term lease, a business could find itself on the financial hook for the rent, regardless of whether their business makes it or goes under. 

Another consideration that must be made with a commercial lease is an agreement regarding how improvements will be handled. If alterations or a remodel is going to be necessary, who will pay for this? Will it be solely the responsibility of the business? Or will the landlord also be partially responsible for these costs?

At the end of the day, the thing to remember is that leases hold a lot of power and are negotiable. However, signatures tend to be binding, which is the reason why many business owners prefer to have an attorney look over the agreements beforehand. Additionally, even the best plans can still carry with them litigation risks. Again, though, with so much on the table, its best to reach out to an attorney as soon as there is reason to believe a dispute is going to arise.