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13 Tips For Negotiating a Commercial Real Estate Lease
If you are a tenant, here are 13 quick tips on how to negotiate a commercial lease:
- Have a longer grace period to pay your rent - A longer grace period reduces the chance of an unnecessary penalty while creating more time for the tenant to make the payment.
- Shorter lease terms are better – With a shorter lease comes smaller financial liability; Also try to obtain an option to remain in the location for a longer term if you so elect; try to set the option rent amount in advance.
- Rent Increases- Be aware of the mechanism for rent increases, they can be a fixed dollar amount or determined according to a formula.
- Restrictions- Look at restrictions on signage, subleasing and the type of use that is permitted at the premises.
- Look at other leases- Get your hand on other leases and speak with other tenants to get a sense of rates and terms for comparable space.
- Get a kick-out clause – This deals with breaking the lease early. You want flexibility and the option to pay a penalty to the owner instead of being responsible for your entire full term lease.
- Personal Guaranty - try to avoid them or they should expire at the end of the first lease term if there is a lease extension option and they should be limited to a fixed dollar amount.
- Reduction in the number of things that are considered an event of default - This will lower the risk of the tenant defaulting on the lease.
- Reduction of landlord’s remedies for default – This option will limit the landlord’s options on what he/she and/or it can do should you default on your lease.
- Option to repair and/or rebuild the premises– This will give you (the tenant) the option to be proactive and do your own repairs instead of waiting on the landlord.
- Shorten rebuilding and/or repair time for the landlord –This will force the landlord to have a quicker turnaround time for repairs and can provide you with a means of canceling the lease.
- Option to buy – Keep your options open
- Before you sign the lease, review the document with an attorney to be sure that you understand the terms, that your interests are being adequately protected and that you are receiving the customary rights a tenant is entitled to in a commercial lease in your area.
This list is only a sample of lease terms one should consider when entering into a lease agreement and should not be relied upon as legal advice. We advise you to consult with a local attorney in order to fully protect your rights. Thank you for visiting HallandaleLaw.com
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