Revisions to Negotiate in Your Small Office Lease in Kansas City
Startups and small businesses negotiating for an office space—maybe for the first time—need to know the places in the lease where they have a little leverage and can negotiate for a better deal. Commercial real estate leases are presented to the tenant in a form that very much favors the landlord, but that doesn’t have to be the final word in negotiations. Small businesses might not have as much leverage as bigger companies, but careful planning and a knowledge of what to push for can lead to successful resolutions. And while research and planning is an important factor, a small business can always benefit from having the assistance of a broker or an attorney in their corner. Here are a few places in a lease where tenants typically find success asking for revisions, as suggested in the article “Small Tenant Lease Negotiating”:
#1 Landlord Consent
Landlord consent may be required of the tenant in two different cases:
- Subleasing or Assignment – If a tenant wants to sublease a space or completely assign the lease to a new business, they may be required to get the approval of the landlord for the new tenant. While the tenant might not be able to negotiate for the elimination of this clause, one thing that could help is to require that the landlord must be reasonable in their rejection of a potential new tenant.
- Transfers – If a business experiences some sort of change in ownership due to a shift in stock shares or a merger with another company, they may also have to get the consent of the landlord to transfer the rights of the lease to that new party. To have this flexibility, try to negotiate for landlord consent to not be required in the event that the transfer the result of a merger or a business buying the majority of your business’s assets. Often landlords will agree to this as long as the new ownerships has the same financial worth as the original.
#2 Common Area Maintenance Audits
Most standard leases do not contain any mention of an audit if there is a dispute over the common area maintenance rates, but it is common for a tenant to be able to negotiate for this right. Typically this clause stipulates that the two parties will try to resolve the issue within a specified period of time, but if they cannot reach an agreement, a certified third party auditor will be called in to resolve the dispute. It is also possible to specify that the landlord needs to assist with the audit costs in certain cases.
#3 Tenant Alterations
An original lease will often completely prohibit any alterations without the permission of the landlord, but this is typically seen as an extreme restriction—one that would require you to call the landlord every time you hang a picture on the wall. Try to limit this by negotiating for the right to make mall cosmetic changes to the interior of your space, for example painting the walls or changing the carpet. As long as the changes a tenant wants to make are non-structural and not visible from the exterior, most landlords are willing to allow the tenant to make cosmetic changes within a certain budget limit.
#4 Capital Improvements
Some landlords will want to pass the cost of capital improvements—improvements or replacements to the whole building or property—on to the tenant. However, because these alterations will increase the value of the property for the landlord beyond your tenancy, try to negotiate for the landlord to carry the burden of these costs.
The only two exceptions to this rule would be alterations to comply with new laws—but only laws put in place after the you move in, not improvements to correct pre-existing violations—and improvements that will lower the operating expenses of the building. However, you as a tenant should only be responsible for these improvements in proportion to the savings the landlord reasonably believes they will cause.
These are just a few of the possible areas where you might be able to negotiate for some revision in your lease. Be sure to also talk to a broker or an attorney about ways you can negotiate for better occupancy/abandonment requirements, revisions to the mitigating damages clause, and a request to waive punitive damages or claims for profit loss. Commercial leases can be complicated documents, but with the right preparation and support team, even new or small businesses can get a great deal on a perfect space!
Is your business looking for a small office rental space in Kansas City? Give us a call at 913-685-4100 to tell us what you are looking for in a space and find out more about our available affordable office space in Kansas City.