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Negotiating for your first commercial lease? Read this first

On Behalf of | Apr 21, 2021 | Transactional Services |

Your business has been thriving — and it’s outgrown your kitchen, garage or home office. It’s time to get your first commercial lease.

Be careful, however. Residential renters enjoy legal protections that commercial renters don’t. In general, commercial landlords and renters are free to negotiate the best deal they can — and the average commercial landlord is pretty savvy.

How do you negotiate from a position of strength?

The more clearly you define your strategy, the better positioned you’ll be to negotiate with authority. Here are some tips:

  1. Figure out your budget. This is the absolute maximum you can afford. Knowing this in advance will keep you from getting starry-eyed and committing to something you can’t handle.
  2. Don’t agree to the base rent. Most landlords automatically assume that commercial tenants are going to negotiate over the rent. If you agree to their first offer, you’re probably paying too much.
  3. Make a list of what you need, what you want, and what you’d like to get. You won’t get everything but knowing your “must-haves” will keep you from making a big mistake.
  4. Consider all possibilities. You may run into unexpected financial problems — or your business may explode — after you get into your new space. Either way, you may want out of your lease unexpectedly. Make sure you consider the value of an option to sublet your space to someone else.
  5. Look at issues with competition and co-tenancy. You may be able to negotiate a clause in your lease that keeps competitors out of the same plaza or building. Or, you may be able to negotiate the right to break your lease if the plaza’s anchor store (which you expect to boost your business) suddenly vacates.

Finally, have an attorney handle the negotiations for you. When you’re wearing your heart on your sleeve (and most entrepreneurs are unabashedly enthusiastic about their business), it’s hard not to broadcast your hopes and fears — and a smart landlord may play on those. Negotiating a lease requires a cool head.