Here are some more timely and valuable tips from The Lease Coach. And while the final decision on matters related to any business rests with the owner, we've found there can be great value provided to the owner by engaging experienced professionals as a part of your advisory team!
Thank you Dale Willerton and Jeff Grandfield for these helpful tips 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.
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:
Cap Your Operating Costs: Tenants are understandably frustrated when Operating Costs rise. It is possible to negotiate a cap on these Operating Costs. In your Offer to Lease, simply state that the Operating Costs/Occupancy Costs/Common Area Maintenance/CAM are capped at a maximum increase per year (for example, 5 or 10%). Even this is high in some respects, but too frequently tenants get caught unaware with unexpected increases.
Give the Loser One Last Chance: If you are simultaneously negotiating with two or three landlords (and do so, by all means, as it creates competition for your tenancy!), one deal will eventually win out. However, you should always go back to the losing landlord offering them one final chance to win you as a first-time tenant (or for the renewal period). It’s difficult to know when you have received the landlord’s best and final offer. Faced with losing your tenancy, the landlord may well surprise you with an 11th hour deal that changes your mind on which location to lease.
Free Fixturing Period: The weeks (or months) that precede the lease commencement date are called the fixturing period. Negotiate for at least Minimum Free Rent (and preferably Operating Costs free too) during this build-out stage. The longer the fixturing period, the better.
Don’t Be Too Assumptive: It’s natural to make certain assumptions. However, in negotiating commercial leases, always get your assumptions confirmed. For example, a tenant may assume they can close their store on Sundays; however, the landlord may expect you to be open seven days a week. Ask, clarify, and document your assumptions (in advance, if at all possible) to avoid misunderstandings.
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
What's been your experience?