I had a phone call the other day from an entrepreneur looking at buying an existing business. In this first conversation, it didn't take long to see that he was under some pressure, and quickly rushing towards signing documents that would include his taking over a commercial lease, well ahead of fully investigating the potential of the business opportunity.
However, this type of story is repeated on a regular basis, and it's really unfortunate! It's unfortunate because there are safeguards that can be put in place to reduce potential down-side risks. A few simple things can provide you with the time necessary to make a more informed and rational decision, without the fear of the opportunity slipping through your fingers.
Here are some valuable tips and suggestions from The Lease Coach that I think you'll find very helpful! And while the final decision on matters related to the business always rest with the owner(s), we recognize the significance of engaging experienced professionals in those areas where they can add great value.
Thank you Dale Willerton and Jeff Grandfield for providing the following helpful insights for our "Business Success" audience!
Negotiating Commercial Leases & Renewals For Dummies
For many business-owners, negotiating a good lease or lease renewal against an experienced agent or landlord can be a challenge. While an entrepreneur focuses on marketing and managing, savvy real estate agents and brokers are specialized sales people. Their job is to sell tenants on leasing their location at the highest possible rental rate.
As explained in our new book, Negotiating Commercial Leases & Renewals For Dummies (co-written with my colleague, Dale Willerton), tenants may go through the leasing process only two or three times in their entire lifetime – yet they have to negotiate against seasoned professionals who negotiate leases every day for a living. Negotiating appropriate leasing terms is vital for an entrepreneur as the amount of rent he pays will directly affect the business’ financial bottom line.
Whether you are leasing a new location for the first time or negotiating a lease renewal for your business, these are some money-saving tips for tenants:
Make all Offers Conditional: When negotiating a new lease, make your Offer conditional upon certain things such as financing, partner approval, satisfaction with the formal lease agreement, zoning, construction estimate costs and so on. This will legally and ethically let you rescind your Offer to Lease if outside circumstances hold you back. If you need more time before signing a lease, simply request an extension in writing so that you can potentially remove your conditions at a later date.
Operating Cost Queries: Operating Costs/Common Area Maintenance or CAM costs often make up a large portion of a tenant’s paid rent. Before you lease, ask the landlord and existing tenants if Operating Costs have increased much over the past year. Base/minimum rent is fixed, but Operating Costs are adjusted yearly and tend to rise more often than fall. Landlords managing their own property may tend to overspend to maintain or increase property value.
Beware of the Realtor’s Dual Agency: If the Offer to Lease presented to you states that you are subject to dual agency, beware. Effectively, this means that you are giving the realtor the right to represent you and the landlord simultaneously (and can one realtor simultaneously serve two masters?). If the realtor’s commission is being paid by the landlord then most landlords believe that the realtor is working in the landlord’s best interests. You can remove dual agency from the Offer to Lease before signing: cross the term out by pen if you don’t like it.
For a copy of our free CD, Leasing Do’s & Don’ts for Commercial Tenants, please e-mail your request to DaleWillerton@TheLeaseCoach.com.
Jeff Grandfield and Dale Willerton - The Lease Coach are Commercial Lease Consultants who work exclusively for tenants. Jeff and Dale are professional speakers and co-authors of Negotiating Commercial Leases & Renewals For Dummies (Wiley, 2013). Got a leasing question? Need help with your new lease or renewal? Call 1-800-738-9202, e-mail DaleWillerton@TheLeaseCoach.com or JeffGrandfield@TheLeaseCoach.com or visit www.TheLeaseCoach.com.
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