Once you have considered your business’s needs and narrowed down potential spaces, it is time to begin negotiations with potential landlords. At this stage, a Request for Proposal (RFP) can be a useful document in making sure those needs are met.
What Is an RFP? For those unfamiliar with commercial real estate jargon, an RFP performs a similar function for a tenant as a standard form lease document does for a landlord. The form lease document represents a “wish list” for the landlord; the RFP serves the same purpose for the tenant. The RFP should include all of the tenant requirements that your business determined when analyzing what you are looking for in a rental space.
Why is it Important? Once you present your RFP, it becomes an important part of lease negotiation procedures and helps keep a focus on unresolved issues between the two parties. Here are a few specific details about the importance of well-prepared RFPs:
- Your negotiation leverage as a tenant will be reduced if you do not include items of significance in the RFP including liability limitations, options to extend or terminate, rights of first refusal, escalations and security deposit provisions, etc.
- It is in the best interests of both the landlord and the tenant to spend plenty of time on the details of the RFP to minimize misunderstandings that might otherwise occur during later negations, as well as the cost of attorneys needed to resolve those conflicts, etc.
- It is important to ensure that an RFP states that it is non-binding and does not impose a legal obligation to continue negotiations to reach an agreement. It might be helpful to state in the RFP that the parties are obligated to negotiate in good faith, but that either party can terminate negotiations if they do not reach a formal agreement within a certain predetermined period of time.
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