Commercial leases are generally accepted to be a negotiation between knowledgeable business people, so there have been far fewer laws developed to protect either the tenant or the land owner of a commercial lease. Because of this assumption, many new business owners may find it difficult to avoid being taken advantage of by a more experienced land owner.

What Should Be Covered in a Lease Negotiation

There will almost always be some kind of dispute or difficulty that arises over the course of the lease simply because of the dynamic nature of a business. In order to avoid costly litigation, most commercial lease negotiation specify the process to be undertaken should any disputes arise. This can include mediation, arbitration or some other non-conventional method that both parties prefer.

The exact measurements of the space and the tenant’s right to move into a larger space should the need arise must be addressed. Because commercial property is not governed by the same laws as residential property, square footage is often exaggerated. Bringing a tape measure is not only smart, but it’s also expected of an experienced businessperson and can help greatly during negotiations.

Utilities are often based on the usage of all tenants combined in smaller complexes, but the responsibility of the payment is often passed to the tenant. Regularly checking that the appropriate percentage of utility usage is calculated with respect to the space and type of business is necessary.

Consider hiring a small business broker like to help you with a new commercial lease negotiation.

Commercial lease negotiation is a much different experience than the typical residential leasing process. These important differences can have a major impact on your ability to start a business and keep it thriving.

How Commercial Lease Negotiation Is Different

• There are far fewer laws that offer protection to the consumer in a commercial lease. This means that there are often no deposit or rent increase caps, nor are there any provisions that help a tenant maintain privacy.
• Commercial landlords also tend not to follow any standardized forms like residential leases. Each element is designed to give the landlord a clear benefit, and these elements may not be developed with the tenant in mind. Because of this, each commercial lease should be scrutinized closely before beginning negotiations.
• Most commercial leases come with less opportunity to break the lease, and much steeper penalties once a lease is broken.
• The good news is that commercial landlords tend to be far more willing to negotiate terms than a residential landlord. This works out well, since nearly all businesses have some kind of special provisions needed to move into a space, and commercial landlords are generally eager to please in order to rent the space.
• Potential tenants should be sure to address any structural challenges a building may pose to regular business or growth. Likewise, a tenant should always ensure that another similar business is restricted from the same general location, and he or she should determine what kind of restrictions apply to signage and use of outdoor space.