Negotiating a Commercial Real Estate Lease, Commercial Real Estate, Gross lease vs net lease, commercial zoning laws

What to Consider When Negotiating a Commercial Real Estate Lease

A commercial real estate lease can make or break a young business. If the location turns out to be a flop, you don’t want to be stuck there for years. But if your company finds itself in a developing hub, you don’t want to worry about excessive rent increases. What about improvements? Legal protections? Zoning laws?

Don’t worry; you’re in good hands, well-seasoned in the art of commercial real estate negotiation. Through our years of experience, we’ve identified the following as key factors to consider when negotiating a commercial real estate lease.

 

Don’t be afraid to negotiate.

Contrary to many residential leases, a commercial real estate lease is often negotiated. From cost and length of the terms to the responsible party for utilities and possible renovation authorization. Be certain that any commercial lease you sign incorporates future business plans into the structure–you don’t want to return to the negotiating table with lost leverage down the road.

Most likely, the landlord or leasing agent you are dealing with is already expecting less than what they’ve initially asked. All you need to do is formulate a counter offer stating what your desires and expectations are. Here are some more tips for preparing a counter offer letter.

 

Clauses are your friend

Commercial real estate leases can appear as an intimidating pile of paperwork; filled with legal jargon that can both harm your attention span. So, if going it alone, remember: Certain clauses can be critical for your business’ success when negotiating a commercial real estate lease. Know your circumstances and keep an eye out for some useful commercial lease clauses, such as:

  • Exclusivity  
    • Can exclude your landlord from leasing additional space to potential competition.
  • Broad Usage
    • Allows your business to expand beyond its initial scope if the opportunity should arise.
  • Subletting or Assigning Lease
    • Permits you to sublease to a separate tenant or business if you need to move or, for some reason, your business is struggling.

 

Gross Lease Vs. Net Lease

There are two types of contracts to consider when negotiating for commercial real estate: Gross Lease and Net Lease. Essentially, a gross lease is all-encompassing, allowing you to pay a monthly total which includes all associated costs (rent, utilities, taxes, insurance, etc…). In contrast, a net lease

 

Know Your Zone

It is vital to research details about zoning laws for your business. Study the county’s zoning map and understand the zoning that pertains to your specific business needs. Here are a few to consider:

  • Commercial operations
  • Industrial
  • Agricultural
  • Historical
  • Residential
  • Aesthetic

In addition to constantly changing laws, commercial real estate leases are often filled with convoluted language, adding yet another hurdle to the dream of owning your own business. If you have questions or concerns about your commercial lease or need a free consultation, we are glad to help.