When we talk with clients about planning their business, whether that's a start-up or expansion of an existing business, it never fails that there are always a myriad of details. At times, this can seem overwhelming. In our experience, and the "good news" is that all of these things can find a place within your business plan!
The same is true with respect to your business location and the details surrounding the facilities where your business will operate. These should not be left to chance!
We are very pleased to share the following tips and suggestion, courtesy of our friends at The Lease Coach. Thank you Dale Willerton and Jeff Grandfield for these helpful and timely comments!
Negotiating Commercial Leases & Renewals For Dummies
|Dale Willerton and Jeff Grandfield|
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:
Negotiating for Free Signage: Many tenants pay rent for signage but forget entirely to negotiate this amount. Whether it’s pylon signage, a fascia sign, or a company directory board, you should negotiate – first, for a rent reduction and second, for a free rent period on the sign rental. If your company uses (or plans to use) pull-away street signs, negotiate hard for this early as most landlords have policies in place regarding all signage.
Subletting Your Space: Almost every space has the potential for subletting. If you must move, close out, or downsize, subletting is a practical solution. While you can’t realistically expect to get 100% of what you are paying in rent, if a subtenant paid you 75% of the rent, you may well have a deal worth making. Before you sublet, remember that you will need the landlord’s permission. If the Permitted Use changes (perhaps from a flower shop to a used piano store), you may have to do some negotiating. When subletting your premises, the original tenant (i.e. you) remains responsible for the lease; however, either you or your subtenant can pay the rent.
Over-holding Penalties: Please read this carefully. Most lease agreements contain an overholding clause (also known as a holding over clause). This is the portion of the lease agreement stating the basic rental rate should the tenant remain an active tenant at the location without a lease renewal. Should the tenant remain on month-to-month, basic rent can increase by 150 – 200%. For new leases, try to negotiate this amount down to 120%. Be especially aware of this at renewal time to avoid getting penalized. Ask your landlord to waive this increase during protracted renewal negotiations so that you will not be penalized.
For a copy of our free CD, Leasing Do’s & Don’ts for Commercial Tenants, please e-mail your request to JeffGrandfield@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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