We asked Miami Attorney Mark E. Rousso A Guide to Negotiating Commercial Leases with Your Landlord.
New entrepreneurs or business owners who have never negotiated a commercial lease are in for a world of trouble if they enter negotiations thinking that such leases work like apartment leases. This could not be further from the truth. There are multiple clauses in a business lease. There is no clause that cannot be negotiated, and there is no such thing as a “standard business lease.”
Since the negotiation of a commercial lease can be a crucial factor in the success of a business, we asked Miami Attorney Mark Rousso form Roussolaw.com who provided the following information about the ins and outs of commercial business leasing in order to understand how a business owner can walk away with the best deal possible.
Some Important Items to Negotiate –
Option to Sub-Lease –
Tenants need a way to get out of the lease if it is not working for them or in the event of business decline or failure. One possible option is to include a clause in the lease which allows them to sub-lease the space. Another possible clause to negotiate is the option to sell the business and assign the lease. Typically these clauses, if accepted by the Landlord will give the landlord a reasonable right to approve or disapprove of the sublessee or new tenant. This permission must be in writing.
Cap on Lease Increases –
It is common that landlords like to raise the rent on an annual basis. There are many ways to achieve this increase. As examples the increases may be tied to the Consumer Price Index (CPI) or may be based on a fixed percentage increase regardless of the CPI or inflation These terms are usually the subject of negotiation between the parties.
Occupancy Date Versus Date Payments Begin –
The starting date of a lease contract is also negotiable, sometimes a business owner can negotiate that the payments don’t begin until a specified time after the occupancy date. This allows the business owner to make any improvements to the space and actually be open for business before they begin making payments.
Two Huge Caveats –
You need to ensure that your business is an allowable use of the property. That is to say, you should check with the municipality or county and make sure there are no restrictions as to what type of business you will be allowed to maintain in the space you are looking to lease. Additionally, keep in mind that if you are building out the space a plan for the build out will need to be reviewed and approved by the building department prior to you commencing work on the build out. Building plan approvals can set your schedule back significantly. It is important to go in with your eyes open prior to singing the lease.
Termination Clause –
Also, Mr. Rousso says it is important that the termination clause of the lease agreement does not kick your business out if you miss a payment by one day. There needs to be a bit of relief built in so that you can make up a missed payment in a fair and reasonable fashion.
Commercial leasing is complex. It is beyond the scope of this article to fully inform business owners how to negotiate leases to their full advantage. Seek advice from an attorney who is experienced in commercial leasing can help you avoid issues and head aches.
“This article is not intended to constitute legal advice. By posting and/or maintaining this website and its contents, Mark Rousso, and Rousso Law do not intend to solicit legal business from clients located in states outside Florida.”