Let’s play hardball.
Negotiating your lease is essential. From getting bonuses like free build out time, to making sure there are reasonable “out” clauses built in – we’re going to give you a primer on how to get the most for your money. Of course, make sure to have a good lawyer help you in the end!
What not to do
There are a variety of things that will totally kill your dream from the start, so here is a quick list of things NOT to do!
- Don’t negotiate in “panic mode” – if this is your second location you should really have all the time in the world, but if you are getting kicked out of your current location you might be feeling the fire getting closer. Either way, do your best to stay level-headed – landlords can smell desperation from a mile away – don’t let that be you.
- Don’t sign a long term lease without proportional concessions – sure, your future landlord will likely want to lock you in for a long time, 5 or 10 years, maybe longer. If they want you to sign on long term, make sure you get something in return, like free rent during build out – or better yet, free build out all together.
- Don’t lock yourself in – Yes, your lease will lock you in, but have some wiggle room. Get some clauses that will let you sublease or sell/assign your business, so if the going gets tough you will have some sort of way out from under the long term financial bleed.
- Don’t think you are signing a “standard” lease – there is no such thing as a “standard” business lease. Everything is negotiable, clause by clause. Get a good lawyer and make sure you are protected…which brings me to
- Don’t hire just any ole lawyer – get a real estate lawyer who specializes in commercial lease negotiations and who works well with your personality. Check their refrences – trust but verify. Call them up and see what their experience was.
What TO do
- Do some research – there are tons of books out there on how to negotiate the best lease for your business, but if you don’t want to do much footwork, check out “Negotiate the best lease for your business” by Fred Steingold and Janet Portman.
- Negotiate the rent and the term of your lease. These are the two big points, so you want to get after them out of the gates. The trick is to give yourself some long term flexibility. Try to get a one or two year lease with the option to renew and minimize rent increases over the term (or renewal options). Don’t be shy, push back. Your future landlord will want to lock you in for eternity if possible, make sure to press for some sweeteners in return.
- Calculate extra expenses – there will likely be tag on fees. Things such as maintenance, upkeep for shared facilities and utilities (how are they split up? how are they measured?). Make sure to get a list of all these “hidden” fees and try to get your hands on an example sheet of the typical monthly cost of these.
- Clarify who is liable for maintenance and repair work. Commercial leases are not like residential leases where the landlord assumes all responsibility for maintenance and repair – so check your lease and find out what you are responsible for. Is it reasonable?
- Read the lease – seriously. One would think this need not be a bullet point, but then again, how often do we all just trust and sign something? So take an evening and read it. Don’t just trust your lawyer or your broker – they won’t be paying the rent down the road.
- Get some mentoring – either through free resources such as SCORE or the SBA, or through a local business, don’t just go it on your own, get some advice from someone who has been through it, but doesn’t have a vested interest in it.