Commercial Real Estate in Kansas City: 6 Leasing Tips to Protect Your Business
If something happens that means you have to leave your office space for lease in Kansas City early – hopefully the fortunate case of your business outgrowing the space, but also the possibility that your business is no longer able to afford the space – it is in the best interest of both you and the landlord to have an exit strategy that protects everybody. When you are negotiating a lease, you have to take the time to work out what will happen if you need to leave, and make sure the terms are clearly spelled out in the lease – it is not pleasant to think about, but you need to do more than just sign a lease hoping for the best. Here are some tips for protecting yourself in the event that you need to terminate your lease, as described in the article “Getting Out of a Commercial Lease”:
- Set Income Projection Goals. One possibility that would protect you is to negotiate for the right to end your lease if your business is unable to reach reasonable income projection goals by a certain date, for example one year or six months into the lease. This way, if your business is in a position where it cannot afford the space anymore, you will be able to leave without incurring that financial burden.
- Option to Renew. Landlords always prefer tenants to sign longer leases, while new businesses generally favor shorter term leases. But there is a happy medium – try to negotiate for a short term lease (1-2 years) with options to renew, for example two options for 1-2 more years or one option for 3 years. This way you have the opportunity to reevaluate your business’s status frequently and decide if it is worth the risk to continue in the space. Usually landlords will want you to exercise this option by a certain deadline – for example, three months before the end of the lease, and possibly they will require a small increase in rent, which could be doable for your business if you are doing well enough to extend your lease of the space.
- Ask the Landlord to Terminate. If you are really in a difficult situation, you could try to simply ask the landlord to allow you to leave. There is definitely no guarantee that they will agree, but if the market is good and they can quickly find a new tenant – perhaps even at a higher rental rate – they might be willing to allow the termination of your lease.
- Break the Lease. If worst comes to worst, you could simply leave the space and accept the penalties. In all likelihood you as the guarantor will be on the line for rental payments for a period of time, but the law does require landlords to be reasonable in mitigating this penalty, and they must be actively searching for a new tenant to fill your space. Once they find a new tenant, you are no longer obligated to pay rent.
- Find a Replacement Tenant. Another way to protect yourself in the event that you have to walk away is to put a clause in your lease saying that the landlord cannot unreasonably reject a new potential tenant. This means that if you need to leave you can speed the process of occupying the space along by looking for a new tenant yourself to sublease or transfer the lease to.
- Buy-Out. A final option would be to ask your landlord about the possibility of a buy-out. This option might be difficult to exercise if you have a lot of time left in your lease, but perhaps your landlord will be open to making a deal or keeping your security deposit in exchange for letting you leave.
Your best defense in this situation is making sure that you are protected upfront in your lease. Try to negotiate for various provisions that you can fall back on in the event that you need to unexpectedly leave.
If your business is looking for new commercial real estate in Kansas City, give one of our commercial real estate agents in Kansas City a call today at 913-685-4100 to find out more about our commercial property management in Overland Park, KS, and our available commercial office space for rent in Overland Park, KS!