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2 ways to protect yourself when negotiating a commercial lease

On Behalf of | Sep 21, 2022 | Real Estate |

Signing a commercial lease for your restaurant concept or new retail shop is a crucial move. Without a dedicated space, you can’t truly begin operating your company. Leasing a property requires less upfront investment and less preparation than buying a commercial property for a start-up business.

However, a commercial lease is still a massive commitment. Unlike residential leases that may last from month to month or for a year, commercial leases are often valid for multiple years. You will likely need to commit to two, possibly more years, in the same space. You will also usually pay more per square foot of space than you would pay to purchase property or lease residential space.

Although many potential commercial tenants think that they have to sign the lease presented by their future landlord as-is, you can potentially negotiate for certain terms that will make the lease more favorable for you as the tenant. What changes to the lease will reduce the risk you have when starting a business?

Creating a way out if the business fails

Perhaps the location might be vulnerable to lengthy closures after inclement weather, or maybe you rely on companies located at the far corners of the globe to supply your materials for production. If so, including a force majeure clause in the contract could potentially protect you from mounting costs while you are unable to open your business. If forces outside of your control close the business, you can potentially end the lease.

On the other hand, perhaps you simply want to include a clause that would allow you to find a new tenant to take over your lease if the business fails and you need to close instead of remaining responsible for rent payments even when you no longer use the space.

Negotiating maintenance services and costs

Landlords who own commercial buildings often charge a premium for their services and spaces. Especially if your startup has few workers or minimal traffic, it may be possible for you to negotiate a lower share of the maintenance fees or more direct maintenance and repair support from the landlord to either reduce your costs or your practical responsibilities as a tenant.

Depending on the location and the local demand for properties, landlords may also make concessions in other areas in the lease, such as the monthly rent they charge or how long the lease lasts. Thinking about your prospects and risks can help you determine how to protect yourself when signing a commercial lease.