Negotiating and Drafting Tips for Commercial Leases 

Leasing commercial space is one of the most significant financial commitments entrepreneurs will make, with significant implications for themselves (as guarantors) and their business. Negotiating and drafting a lease agreement can be a complex process, and it is essential to ensure that the terms of the lease protect your and your business’ interests as a tenant, and that you do whatever you can to limit your personal liability.  
  1. Understand Your Space, Location, and Growth Needs
Before you begin the negotiation process, it is essential to understand your business’ current and future needs. This includes factors such as:
  • The type or configuration of the space you need
  • The amount of space you need for your current operations
  • The amount of space you need for planned growth
  • The location and accessibility of the space
  • The duration of the lease, including options to extend the time of occupancy
  • The budget for rent and associated costs, and incremental increases 
  • Any specific requirements related to the nature of your business
By having a clear understanding of your needs, you can negotiate effectively with the property owner and ensure that the terms are suitable for your business.
  1. Research the Property and Landlord
Before entering into lease negotiations, it is crucial to research the property and the property owner, or landlord. This includes:
  • Visiting the property and assessing its suitability for your business needs
  • Checking the landlord’s reputation and track record with other tenants
  • Researching court records to see if the landlord sued prior tenants 
  • Engaging a leasing agent to give you options and educate you on these options
Negotiating 2
  1. Negotiate the Terms
The negotiation process is a critical step in securing a favorable lease agreement for your business. Key areas to focus on during negotiations include:
  • Negotiating a fair rent that aligns with the fair market rental value of the property and your business budget.
  • Negotiating a lease duration aligns with your business needs and provides flexibility to renew or terminate the lease as necessary
  • Clarifying the responsibilities for maintenance and repairs to ensure that the property remains in good condition and that any costs associated with repairs are reasonable.
  • Ensuring that the permitted use of the property aligns with your business needs and that any restrictions on use are reasonable.
  • Negotiating renewal options that provide flexibility for your business and enable you to extend the lease if necessary.
  • Negotiating a reasonable security deposit that aligns with the lease terms and your budget
  • Negotiating away the need for a guaranty, and, if one is required, to limit the guaranty
  1. Negotiate and Draft the Lease Agreement to be Executed
Once you have negotiated the key terms of the lease, it is essential to draft a lease agreement that protects your interests as a tenant.  Leases include many terms, and all of them are negotiable. Never agree to the draft proposal from the landlord without reviewing and analyzing the draft in detail, and having a lawyers redline it. Some terms to look for and analyze carefully are:
  • Duration of the tenancy
  • Base rent
  • Security Deposit amount
  • Annual increases in rental costs
  • Penalties and late fees
  • Additional rent, such as taxes, CAM, etc…
  • Taxes
  • Default terms and conditions
  • Tenant Improvements
  • Landlord’s Improvements
  • ADA compliance terms
  • Options to renew
  • Force Majeure terms
  • Guaranty terms
  1. Seek Legal Advice
Commercial lease agreements are complex documents, which have legal, financial and other obligations. Therefore, it is important to seek legal advice to ensure that the terms of the lease protect your interests and that you are being treated fairly. A lawyer with experience negotiating can help you understand the process, and  help you protect your and your business interests.
For more information or get help with your commercial lease, please call Private Corporate Counsel  at 407-647-7887 or email us at to talk to a business lawyer today. Private Corporate Counsel can help you negotiate your business’ next commercial lease or renew your existing lease. 
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