Negotiating Your Office Lease

Negotiating a commercial lease can be tricky, and mistakes can come back to haunt you.

by Celeste Marchand

Your lease for office space will have a large impact on the future of your business. While you will need something that meets your current needs, keep the future of your business in mind as well. Take stock of your present requirements and your plans for the future. What if your business should fail? What consequences would there be in terms of the lease.

Think about the term of your lease. Do you want to lock in stability of location and possibly price by negotiating a long-term lease? Or do you need the flexibility to move to a bigger, better location? How much of an interruption to your business would a future change in location cause? Thinking about your business plans for the future, is there any time that would be better or worse for your lease to come up for renegotiation?

Make sure you know exactly what you are leasing. You will want to measure the office space for yourself to make sure you have envisioned it accurately. You should also clarify issues such as what areas are common areas, who can use them and for what purposes. What kind of parking is there and how much of it is included? Who will be responsible for the costs of repairs or renovations? What, if any, are the restrictions on your use of the property? You will want to make sure that the property is zoned for your type of business. Unless you are very certain that the zoning is appropriate, you should try to get a clause in your lease that will release you from the lease if you can't get zoning approval for your business.

When it comes to renewals, you want to avoid any terms that give the lessor unlimited ability to increase your rent. If your business becomes very successful and would suffer from a change of location, the lessor will have a lot of leverage to raise your rent at renewal time. Instead, try to negotiate a formula for increases up front. This will give you added stability and predictability. If that doesn't work, try to get a right of first refusal for future offers to lease your space.

What are your obligations if you can't or don't want to complete the term of the lease? You should try to get a term that lets you substitute another tenant for the remainder of your lease. If your business would benefit greatly from a move, it may be worth the cost of a default. But why pay that expense if you can find a new tenant for the space?

Finally have your lawyer look at the lease. He or she can tell you which terms may be more troublesome than others and help you decide what points are really worth holding out for.

For lot's of great tips, make sure to check out the commercial lease negotiations section on Nolo.com.

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