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Scrutinizing Your Lease Agreement

Unless you own the property, a lease is very important for your business. Negotiating a commercial lease with terms that are favorable for your business positions you to succeed.

Generally, lease agreements are prepared to give the landlord an advantage. It is your responsibility to read it thorough before becoming a tenant. Understand the terms and request clauses that give you an advantage.

Evaluate Lease Terms

After choosing a location for your business and receiving a lease agreement, review the terms. If you are a small business, a one to two year term is typically best when there is an option to renew. This works because you are not tied too long, but you also have the option to stay longer if the location is a good fit.

Research Rent for Comparable Locations

The amount you pay is important when calculating the operational expenses of your business. Know what the going rates are in the area. This gives you an advantage to negotiate a fair price. Renewal options should specify rent increases so you avoid surprise since the landlord will likely want to increase your rent each additional year of the lease.

Check for Hidden Costs

Typically, a commercial lease is either a gross lease or a net lease. With a gross lease, all costs for renting the space are included. A net lease adds costs in addition to your rental payments.

Keep in mind that most commercial property landlords make tenants responsible for the upkeep of common areas and maintenance. Do your best to negotiate terms while also learning the current condition of specific systems.

Ask for Favorable Lease Modifications

Look for ways to modify the lease with clauses that benefit you. For instance, you might want to add a clause that allows you to sublease the space if you needed to close or relocate. You might want to add a clause that prohibits the landlord from renting to another business that is like yours.

Understand Default and Termination Stipulations

Reading the terms of your lease is crucial, especially when it comes to default and termination. Make sure the clause allows you to satisfy a default before being evicted. Do your best to avoid penalties for early termination if you decide to leave before the end of the lease. Negotiate being able to pay one month's rent instead of the remaining balance of the lease.

It is important to read and understand your commercial lease. This gives you time to realize the benefits and ask for changes if necessary.

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