Leasing Office Space

Column by Steve Strauss

Negotiating a lease with a landlord is not all that different than negotiating the purchase of a car. The important thing is to know what you want going into the deal and to remember the rule that everything is negotiable.

Indeed, if you are at the stage where you are negotiating over lease terms, then you have become a valuable commodity to the landlord. Finding qualified businesses that are willing and able to take on a commercial lease payment is not so simple. Accordingly, you may be in the power position when negotiating a lease and can ask the landlord for concessions and changes to the lease, as necessary.

You do so by doing your homework first. Find out how much similar spaces are renting for. Is the vacancy rate high or low in this area? (If it's high, you can negotiate a great deal because the landlord needs you.) If the space is vacant, find out how long it has been vacant (the longer the better for you). The more you know, the better equipped you will be to negotiate a good deal.

Once you are presented with the lease, read it carefully, and then give it to your lawyer for review. If you find some part of the lease that you or your lawyers don't like, negotiate that point. Remember that the lease was drawn up by your potential landlord's lawyer and will certainly favor your landlord. Remember too that although you might be presented with a pre–printed lease, and that it may seem difficult to change, it is nothing more than a contract, and the essence of contract law is that both sides must agree to all conditions. That, in fact, is why a contract is also called an agreement. If you don't like something, it can be changed.

The important things to understand and agree to are:

• The length of the lease. You want it long enough to establish your business, but not so long that you are locked in if your venture doesn't work out. A year or two, with an option or two for a renewal is a good idea.
  
• The lease payments. Getting a month or two free is not unheard of when signing a long–term lease. Try to put a cap on future rent increases in the option years.
  
• Determine whether the lease will be gross or net. A gross lease is one where the landlord pays for taxes, insurance, janitors, and utilities.
  
• Other obligations. Make sure you understand all of your obligations under the lease.

Above all, try to cultivate a good working relationship with your landlord. That will go farther towards working out problems than a dozen letters from your lawyer.

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