Once you find a viable location for your business, you will need to enter into a legal agreement with the owner of the property that sets forth the terms and conditions under which you will lease the premises for your business. The terms of your lease will likely have a huge impact on your business’s bottom line for years to come. A commercial lease is a complex agreement. Overwhelmed by the complexity and eager to get their business started, too often I have seen smart business owners simply sign the lease form provided to them by their landlord’s attorney, only to find out years later they did not understand what they signed. A tenant must be sure to negotiate terms that are advantageous to their business and that meet their business’s needs.
Some key points to look at in any commercial lease include:
1. The duration of the lease term?
2. When does the tenant begin to pay rent?
3. What is included in the base rent and what additional expenses will tenant be responsible for?
4. Will the rent increase during the term of the lease and/or the option terms, and if so, how will the new rental amount be determined?
5. Does the tenant have any options that allow the tenant to extend the term of the lease?
6. Is the landlord willing to offer any incentives such as an improvement allowance or reduced or free rent during the first year of the lease term?
7. What repairs are the responsibility of tenant and what repairs are the responsibility of landlord?
8. What are the limitations for the allowed use of the leased premises?
9. Does the lease require a security deposit and when will the deposit be returned?
10. What types and how much insurance does the landlord require?
11. If the business is sold, can the lease be assigned to the new owner?
12. Is the leased premises actually the size stated in the lease?
13. Will a personal guaranty of the lease be required?
14. Are there any terms verbally negotiated or stated in a Letter of Intent with the landlord that are not reflected in the lease?
Why Using a Lawyer to Negotiate Your Lease Can Be Beneficial
Negotiating a lease is like anything else in life – the more times one does it the better you become. Leases are complex and are also extremely important documents. A good lawyer will understand the legal terms used in a lease and will be able to explain what the lease says in laymen’s terms to the business owner. Lawyers save tenants many times more than what they charge in fees by being able to negotiate more favorable terms for the tenant. Lawyers who do this regularly are also familiar with market conditions and know what type of landlord concessions are being offered to tenants in the jurisdiction in which they practice. Lawyers who have represented both landlords and tenants can provide a great deal of insight into what the other party may be thinking and the psychology of the negotiation. You are better off relying on your lawyer than your realtor, as realtors have inherit conflicts of interests as they only get paid when a lease gets signed.
Lustigman & Wolfson, LLC is a Colorado law firm serving clients in Denver, Adams County, Arvada, Thornton, Glendale, Cherry Creek, Lodo, Colorado Springs, El Paso County, Pueblo, Canon City, Fremont County, Arapahoe County, Aurora, Jefferson County, Clear Creek County, Centennial, Golden, Georgetown, Gilpin County, Westminster, Littleton, Broomfield, and Lakewood.
