Negotiating a Commercial Lease

June 2nd, 2015

When you first decide to open your business, you will need to find a space in a good location that you can afford and that is the right size for your needs. When first considering a commercial lease, it is necessary to assess how much you can afford, how big a space you will need, and how long you would like to rent.

There are several types of commercial leases a business owner can enter into depending upon the needs of their business. Certain types of leases favor different types of businesses. Some lease options to consider are:

• Gross Lease- the tenant pays a flat amount each month and the landlord is generally responsible for the costs associated with the building such as heat, electric, etc.
• Net Lease- tenant pays a flat fee each month in addition to certain expenses. These may also come in the form of double net leases (tenant pays rent, taxes and insurance) or triple net leases (tenant pays rent, taxes, insurance, and maintenance).
• Percentage Lease- the tenant pays a fee associated with the income of the business either in addition to or in lieu of a monthly rental fee.

Provisions in your lease should include renewal options, sublease and assignment rights, as well as clauses concerning how much the landlord may increase the rent past the first lease term, signage, and exclusivity if you are leasing in a shopping center. Although a typical commercial lease will weigh more in favor of the landlord’s interests, the terms are always negotiable. Many factors can be used as negotiating tools to level the playing field when entering into a commercial lease. These factors include whether you will be making many improvements to the property, who will maintain the property, and the market conditions at the time of the negotiation.

Regarding the term of your lease, it is important to take into consideration how new your business is, what type of business you have, and whether the location you have chosen is key to the success of your business. When negotiating the lease term, you may wish to exercise a short lease with flexible options to renew if your business thrives in that location.

Commercial leases are quite different from residential leases. It is important to enter into a lease agreement that is fair to both parties. Since it can be a difficult area in which to navigate and negotiate, it is wise to consult with an experienced business attorney who can advise you of your rights and make sure that you have a lease that is beneficial to you and your business. Contact the experienced attorneys at Bellavia, Blatt & Crossett, P.C. at (516) 873-3000 or (631) 224-7000.

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