You’ve found the perfect place for your growing business. It’s in a great location, you can afford the rent and it has so much potential. Pinterest becomes your best friend as plan all the ways you will make the space your own.
But hold on, before you fantasize about hardwood floors and the balloons at your grand opening, have you read your lease? Like, really read it?
Rent can be one of your biggest expenses and where your business lives is a huge factor in its success but many entrepreneurs sign their lease as presented to them by the landlord without checking to see if it really works for them. Not reading, understanding and negotiating your lease could cost you big, especially if you plan on making significant leasehold improvements.
I’m sharing with you some of the things I look for when reviewing leases and negotiating for clients:
What’s your real rent?
You need to beyond the line that states what your base monthly rent will be and pay attention to TMI and what your share of expenses will be. You have to pay more than the usual attention with a gross lease where you pay one sum to the landlord which covers your base rent and all incidentals which typically include utilities, repairs and maintenance, property tax, insurance and common area expenses. Landlords can sneak clauses in which require you to pay for ALL expenses related to property including a share of their payroll. Speaking of sharing expenses…
Research the Property
This is the time to embrace your inner Sherlock Holmes and figure out as much as you can about the other tenants. You want to make sure that the tenant mix is compatible with your business. If you are sharing all common expenses, check out whether one tenant is using far more than the others as you can use this information to negotiate a lower share of the common expenses. Another key factor is whether an expensive to replace or repair item is near the end of its working life. If you are required to contribute to the replacement of a boiler or HVAC systems it could means thousands in unexpected costs.
Think about the End
While you might be in love with the place, your landlord views this as a business and you’re never guaranteed a lease renewal. Also, landlords can decided to sell the property, displacing long established tenants. Particularly if you’re planning to make lots of leasehold improvements, it’s necessary to think worst case scenario and plan around it. One client invested $80,000 in leasehold improvements only to be informed a year later that the landlord was selling and she had 30 days to vacate. Had she reviewed the lease with the end in mind, this could have been avoided.
Getting a new space for your business is exciting but don’t let the excitement carry you away. Read the lease carefully and get a business lawyer to review it to make sure you’re protected.
If you’re planning to rent a new space soon or know someone who is, get in touch with your questions.
To your success,
P.S. Clients in our Annual Retainer program get one-on-one, strategic advice for everything that comes up in their business at an affordable, predictable price. Apply to join here.