Whether you have found the perfect space for your business, or the perfect tenant for your available property, you should have legal advice and representation before you negotiate and sign the lease. Unlike residential leases, leases of commercial space, particularly when there are large sums of money involved, are frequently open to negotiation. Whether you are landlord or tenant, having a skilled and knowledgeable attorney at your side may save you from financial and logistical pitfalls. The Law Office of Benjamin S. Proto, Jr. is equipped with the experience and know-how to protect your business interests and to see that you make the best deal possible whichever side of the table you’re on.

Basics about Commercial Leases and How They Differ from Residential Leases

There are several important things you should be aware of when looking to lease commercial property, including:

  • Pre-printed commercial leases almost always favor and protect the landlord
  • Commercial leases have no caps on security deposits
  • Commercial leases have no rules to protect tenant privacy
  • Commercial leases are not standard and so must be scrutinized by both attorneys
  • Commercial leases are harder to break than residential ones
  • Commercial leases are almost always negotiated

Your ability to negotiate will be partially determined by how “hot” the local market is. In cooler markets, the landlord loses leverage. The more in demand the space is, the less negotiating power there is for the tenant. Still, if the tenant is considering a long-term lease, the landlord may be eager to seal the deal.

Terms that Can Be Negotiated in a Commercial Lease

These are some of the areas ripe for negotiation in a commercial lease. This is an area in which it is invaluable to have a savvy attorney to look out for your interests:

Amount of Rent

Not only can the amount of rent be negotiated, but so can allowable rent increases (escalations). It is important to determine whether you are dealing with a gross lease, that is, one in which rent includes property taxes, insurance, and maintenance, or a net lease, in which case the tenant will be responsible for these costs separately. In some cases, although the landlord won’t agree to a lower rent, he/she may be amenable to lowering charges for a few months to pay for moving costs.

Security Deposit

Make sure you know how much the security deposit will be and what conditions have to be met to have it returned when the time comes.

Precise Dimensions of the Space Being Rented

Not only do you have to know the length and width of the rooms being leased and the height of their ceilings, you also have to understand what parts of the common areas (hallways, vestibules, restrooms, elevators, storage areas) the tenant will have access to.

Length (Term) of the Lease

In many cases, a short-term lease is advantageous to the tenant because it provides greater flexibility. If the tenant’s business needs to relocate for expand, or unexpectedly fails to succeed, with a short-term lease the tenant will not be stuck paying for rental space that can no longer be used. On the other hand, a long-term lease guarantees fixed rental payments for a longer time period. For landlords, a long-term lease is desirable, even though it prevents frequent rent increases. Because it guarantees a long-term occupant, the landlord is far more likely to be accommodating to a tenant who agrees to this arrangement.

Tenants running the type of business in which location is a major consideration, such as a restaurant or a retail shop, may consider a long-term lease worth the risk. In a great many instances, a short-term lease with an option to renew is the best possible arrangement for tenants, though landlords may be wary of such agreements.

Modifications to the Physical Space

In commercial real estate, the configuration of the physical space is likely to be important to running a business efficiently. It is possible, for example, that the tenant will need partitions or cubicles that do not yet exist or improvements to plumbing or wiring. Decisions about what modifications will be made to the space, who will make these alterations and who will pay for them — all have to be made. It also must be decided who will own removable improvements when the tenant moves out. Landlords are much more likely to agree to space modifications if the building is being newly constructed.

Publicity and Competition

Other not so obvious aspects of preparing a lease space for businesses must also be seriously considered. If the business will be depending on walk-in customers, the tenant needs the landlord’s permission to put up large, visible signs, and the landlord may or may not want to provide such permission, especially is he/she believes other tenants will object. It is also possible that the tenant will want a clause in the lease ensuring that a competing business (such as a second restaurant in an office building) will not be allowed.

Maintenance and Repair

It also has to be established who will be maintaining and repairing the space, particularly in terms of heating, air conditioning, plumbing and electrical work.

Possibility of Expanding or Subleasing the Space

It is important to determine whether it will be possible to expand the commercial real estate space in question if the incoming business expands and whether the tenant will be allowed to sublease, usually an advantage to the tenant but a possible complication for the landlord.

Accommodating the Disabled

According to The Americans with Disabilities Act (ADA), all businesses that are open to the public or that have more than 15 employees must be accessible to individuals with disabilities. One of the points that has to be negotiated before the lease is signed is who will be responsible for making any necessary modifications to the space if, for example, the present space does not include a wheelchair ramp or doorways wide enough for wheelchairs to move through.

Why You Need a Skilled Commercial Real Estate Attorney

As you can see, leasing commercial real estate is a complicated process with many decisions to be made and many potential traps to be avoided. Whether you are the tenant or the landlord, it is essential to have an experienced attorney to guide you through the process. Be aware that the other party will certainly have an attorney to look out for his/her interests, so you should have a professional at your side as well, ready to protect you from any legal snags and negotiate in your best interests.

If you are preparing to lease commercial real estate anywhere in Connecticut, or have commercial property for which you are seeking an occupant, contact me through my website’s contact form or by calling me at 203.307.2915.  Whichever party you will be in the commercial lease negotiation, I am eager to assist you in developing contract language that will protect you on an ongoing basis.