A template for your commercial lease agreement is just one of the many things you’ll need to consider before choosing to lease your commercial property. Here at My Lease Agreement Template, we want to provide you with everything you need to get started on the right foot.
Today we have a video from Dale Willerton of theleasecoach.com. In the video he talks about some tips to keep in mind when negotiating your rental agreement template with prospective landlords. This is good info to have as someone who is looking to lease a property because these negotiations go both ways. Knowing what your tenents will be asking will make you more prepared to offer a fair lease agreement. Have a look and let us know what you think in the comments.
Transcription:
Millions of business owners, entrepreneurs and professionals lease their location. There are tens of millions of square feet of commercial space for lease right across North America.
Hi. I’m Dale Willerton, founder of The Lease Coach, a network of certified lease consultants who exclusively helps tenants all across North America. If you’re planning on negotiating a lease for a brand new business or if you have an existing location and you need to negotiate a renewal, these are some tips you will want to jot down.
Tip number one. Create competition for your tenancy. It would be a mistake to negotiate on just your favorite location. You want as many landlords as possible desiring your tenancy. That will give you a negotiating advantage. If you’re faced with a lease renewal, do not hand your renewal over to your existing landlord on a silver platter. Make them re-earn your tenancy. Look around. See what’s new on the market and create some competition.
Tip number two. Give yourself enough time. For a brand new lease agreement, it will often take up to six months to get the business open. A month and a half for site selection, maybe a month if you go over the offer to lease and negotiate the formal lease agreement then the space needs to be designed and eventually built out. Five or six months can go by very quickly.
For a renewal, we recommend that you start 9 to 12 months in advance. The key here is to do as much negotiating as you can before you have to decide whether or not you should exercise your renewal option.
Tip number three. Do your homework. Talk to as many tenants as you possibly can. They will share valuable information with you about how their lease negotiations went. Some of those tenants may be moving out of the building and you need that information before you sign a five-year lease and move in yourself. As well, when you’re negotiating the term or the length of your lease agreement, remember it does not have to be five years in length.
If you’re planning on opening up a retail business say in a shopping center, a good time of year to open up is October but if your lease agreement comes up for renewal, five years later, right again in October at the peak season, you will be at a disadvantage. Rather than take a 60-month lease, consider taking a 63-month lease or perhaps a 56-month lease. The general rule of thumb is that your lease agreement should begin going into your peak season and your lease agreement should terminate going into your slow season. Also remember a deposit is not mandatory. They may call it a security deposit but in fact, you may not be a security risk at all. Deposits are very negotiable.
Tip number four. Don’t be afraid to ask for more than you expect to get. If you’re negotiating for a tenant allowance, that’s the amount of money a landlord will give you as an incentive or as an inducement to help you build out the location. If you’re negotiating a tenant allowance for $30,000, it makes sense to start by negotiating for $40,000 or $50,000 giving yourself some room to go back and forth. I was able to get a tenant 12 months of free rent because I wasn’t afraid to ask for 18.
Tip number five. Evaluate the real estate agent’s role. Traditionally, real estate agents represent landlords. The landlord is the one who traditionally pays the real estate agent’s fee. If the real estate agent is showing you all over town various locations that are listed by other real estate agents, there will be fee splitting or commission splitting and that may put you at a disadvantage. It’s really important to ask yourself, “Is this real estate agent representing me or is he representing the landlord?” Who is paying that individual? Real estate commissions are typically six percent in commercial real estate. If the tenant pays a higher rent, the real estate agent gets a higher paycheck in most cases.
Tip number six. Measure your space. Landlords traditionally rent their locations by the square foot. Often, tenants will find that they don’t have as many square feet as they thought. That’s called phantom space. We recommended that a client of ours have their space measured. They thought they had 4400 square feet. When we finished measuring it, there was only 3600 square feet. They were 800 square feet short and paying over $1000 a month more in rent than they needed to.
Sometimes the discrepancies are only 25 or 35 square feet but over the term of a lease agreement, 5 or 10 years, that can mean tens of thousands of dollars.
Tip number seven. Have your lease documents professionally reviewed. I estimate that approximately half of all commercial tenants don’t have anyone review their lease documents. That lease document is a very, very valuable asset. At some point in time, you may want to sell your business or assign your lease agreement. You may want to take on a partner or get rid of a partner. The terms and conditions listed in your lease agreement are there for a reason, mostly to protect the landlord. If there’s problem with your lease agreement now, those problems will still be there five years from now.
Remember, tenants don’t get what they deserve. They get what they negotiate.
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