Other than your payroll expenses, what you pay for your facilities will be one of the biggest operating expenses for your company. Whether you intend to move from an existing facility to a larger one to accommodate growth or sign your first-ever commercial lease for your company, you want to make sure that you adequately protect your business.
Most leases have plenty of protections for landlords, but they may not include as much for the tenant unless the tenant specifically negotiates favorable terms. What are some of the most pressing issues that could affect your business in the lease?
How long will the lease last?
Commercial leases often run for multiple years, making them a substantial financial commitment. Especially if your company is brand new or if you have experienced rapid growth, tying yourself to one space for multiple years may not be the best decision. You may need to negotiate with the landlord to reduce how long you have to stay at this specific property.
When can you break the lease?
It is common for landlords offering commercial properties to include terms that make the tenants responsible for rent even after a business fails. Adding a clause that allows you to terminate the lease in certain circumstances or that will limit how much the landlord can charge you after the company closes could protect your business.
You might want to include a force majeure clause, for example, that allows you to terminate your lease if some kind of natural disaster or other extreme situation outside of your control forces the company to close.
What obligations do you have as the tenant?
Landlords often pass on the cost of maintaining the building to their tenants. However, although your landlord charges maintenance fees, you may still be on the hook for certain maintenance and repair expenses at the facility.
You may need to negotiate so that your landlord doesn’t put all of the responsibilities for mechanical maintenance on you. On the other hand, if you are able and willing to do maintenance, perhaps the landlord may adjust your rent to reflect your efforts to maintain shared spaces.
You may also need to address restrictive rules that might limit what happens if you decide to pivot to a different industry. Being creative in how you approach the negotiation of your commercial lease can help you secure favorable terms let make it easier for your company to grow or for you to recover if the company fails.