Do not miss out on an opportunity to negotiate the best lease terms for your business because you do not understand the language of leases! Here are a few more insights into common commercial lease terms:
7. Rent. For small businesses, rent is a crucial part of the lease. It is important to look carefully at this clause for any of the following potential costs or savings:
- Unexpected expenses—be sure you know exactly what parts of the landlord’s operating costs are being passed along to your business.
- Savings that might make it possible for your business to take on other expenses—for instance, a landlord could offer you a “tenant improvement allowance” for improving the space before you move in.
- Any other issues you might want to renegotiate, such as periodic rent increases.
8. Security Deposits. A landlord might ask for a security deposit to cover expenses if you fail to pay rent or meet other financial obligations. Residential landlords in many states are limited to only asking for two months’ rent as a deposit, but commercial landlords are allowed to ask for any amount they think is necessary to cover any of these expenses. Alternately, they might ask for a “Letter of Credit” from your bank, which states that the bank has put aside a specified amount for your landlord’s use in the event you fail to meet a financial obligation.
Be aware of these clauses as you enter negotiations so that you can advocate for your business’s needs!