Top 30 Negotiable Items in a Commercial Lease for Tenants: Building Your Deal

The thrill of finding the perfect space for your business can quickly fade into the sweat of deciphering your commercial lease agreement. A commercial lease can be a dense and intimidating document full of legalese and jargon. But fear not, here are my top 30 negotiable items that can transform your lease from a restrictive contract to a powerful tool for success.

Rent & Term: Setting the Foundation

1. Rental Rate: This isn't just a number, it's your monthly mountain to climb (or descend, ideally). Don't blindly accept the initial offer. Research comparable spaces and propose a graduated rent structure that aligns with your budget and the local market.

2. Term & Renewal: Short-term leases offer flexibility, but long-term leases can secure stability and lock in favorable rates. Negotiate renewal options with clear terms and timelines, including extension rights and potential rent adjustments.

3. Free Rent/Abated Rent Period: Need time to get your business up and running? Negotiate a free or abated rent period to ease the financial burden during those crucial early months.

Operating Expenses & Maintenance: Who Pays for What?

1. Base Rent vs. Gross Rent: Understand the difference! Base rent excludes operating expenses (OPEX), while gross rent includes everything. Negotiate a lease structure that aligns with your budget and risk tolerance.

2. Operating Expenses & Increase Caps: OPEX can be a creeping cost. Negotiate clear definitions, expense categories, and annual increase caps to avoid unexpected surprises.

3. Base Year Dollar Stops: If your lease includes a "Base Year" for operating expenses, make sure to clearly define how the Base Year amount is or will be determined. Be sure to request backup documentation and expense records to verify the amount is fair and understand that Base Years can be good or bad depending on if expenses are expected to rise or fall in subsequent years.

4. Tenant Improvement Allowance: Don't inherit someone else's beige walls. Negotiate a tenant improvement allowance to customize the space to your brand and needs.

Use & Restrictions: Defining Your Business Playground

1. Permitted Use: Can you host events? Sell food? Clearly define your business activities and negotiate for flexibility if your needs evolve.

2. Signage & Branding: Make your mark! Negotiate signage rights and limitations to ensure your brand shines bright and attracts customers.

3. Exclusivity Clause: Want to avoid the competition next door? Negotiate exclusive rights for your business type in the vicinity, boosting your market advantage.

Tenant Rights & Protections: Weathering the Storm

1. Assignment & Subletting: Life happens. Negotiate the right to sublet or assign the lease if you need to exit early.

2. Relocation: Sometimes, plans change. Negotiate a relocation clause that allows you to move to another space within the same building under certain conditions.

3. Right of First Refusal: Don't get squeezed out! Negotiate the right of first refusal to lease adjacent space if it becomes available, giving you a chance to expand.

Looking Beyond the Basics:

1. Personal Guaranty: Many times a personal guarantee may be required to lease a space. Negotiate for the guaranty to expire after a certain number of years or after certain conditions are met. Beware of Cognovit Guarantees as this type of guaranty has "teeth".

2. Early Termination Clause: Prepare for the unexpected. Negotiate an early termination clause with defined penalties to provide an escape hatch, if needed.

3. Gross-Up Clauses: Some leases allow the landlord to "gross up" operating expenses when vacancy is above a certain percentage, adding a potential unexpected cost. Negotiate to remove or limit this clause.

4. Zoning Contingency: Protect yourself from unforeseen changes. Negotiate a clause that allows you to terminate the lease if zoning changes negatively impact your business or if zoning approval is unable to be obtained.

Tech & Innovation: Embrace the Future

1. High-Speed Internet: In today's digital age, connectivity is king. Negotiate access to reliable and high-speed internet infrastructure.

2. Smart Building Integration: Can you control the lights, temperature, and security systems? Negotiate access and control over these features to optimize your space for efficiency and comfort.

Sustainability & Environmental Responsibility

1. Energy Efficiency & Green Initiatives: Reduce your carbon footprint and potentially lower costs. Negotiate for energy-saving measures and discuss shared responsibility for green initiatives.

2. Waste Management & Recycling: Promote environmental responsibility and potentially reduce your costs. Negotiate for proper waste disposal and recycling facilities.

Tenant Experience & Community:

1. Parking & Access: Ensure your customers (and employees) can find you! Negotiate adequate parking spaces and convenient access points.

2. Common Area Amenities: From gyms to rooftop terraces, amenities can attract and retain talent

3. Right to Purchase Building: Have big dreams? Negotiate the right of first refusal to purchase the building in the future, securing your long-term presence and potential equity growth.

Beyond the Lease: Building a Secure Partnership

1. Move-In & Out Protocols: Define clear expectations for move-in and move-out procedures, including timelines, inspections, and potential penalties for damage.

2. Insurance Requirements: Understand and negotiate insurance requirements for both parties, ensuring adequate coverage for the property and potential liabilities.

3. Compliance with Laws & Regulations: Both parties have a responsibility. Negotiate clear communication channels and procedures for ensuring compliance to avoid fines and penalties.

4. Indemnification & Hold Harmless Clauses: Protect your interests. Understand and negotiate indemnification and hold harmless clauses that clarify who is responsible for specific liabilities.

5. Dispute Resolution: How do you settle disagreements? Arbitration, mediation, or courtroom showdown? Choose a method that feels fair and efficient.

Remember:

• Negotiation is a conversation, not a war. Approach it with respect, a clear understanding of your needs, and a willingness to compromise.

• Be prepared with data, research comparable leases, and have alternative proposals ready.

• Don't be afraid to walk away if the deal isn't right.

• Legal counsel is invaluable for ensuring a legally sound and secure agreement.

By wielding these 30 negotiation weapons, you can transform that lease from a restrictive document into a springboard for success. Secure a space that fuels your business growth, fosters a thriving environment for your team, and empowers you to build a lasting legacy. So, put on your negotiation armor, channel your inner dealmaker, and conquer that commercial lease like the savvy entrepreneur you are!

Bonus Tip: Consider offering incentives to the landlord, such as a longer lease term or guaranteed rent payments, in exchange for favorable lease terms.

Now go forth and negotiate with confidence, knowing you have the knowledge and the power to secure the perfect space for your business to flourish!

Happy leasing!