Negotiating commercial leases: Meet the landlord
Tuesday, June 13, 2017
For many commercial tenants, negotiating a good lease or lease renewal against an experienced agent or landlord can be a challenge. While an entrepreneur focuses on marketing and managing, savvy real estate agents and brokers are specialized salespeople. Their job is to sell tenants on leasing their location at the highest possible rental rate.
Tenants may go through the leasing process only two or three times in their entire lifetime — yet they have to negotiate against seasoned professionals who negotiate leases every day for a living. Negotiating appropriate leasing terms is vital for a business owner as the amount of rent he pays will directly affect the company's financial bottom line.
Whether you are leasing a new location for the first time or negotiating a lease renewal for your business, here are two money-saving tips for commercial tenants:
Brokers: Friend or foe?
It is not uncommon for commercial tenants to believe the real estate agent or broker is working for them. However, it should be noted that the listing agent's commission is being paid by the landlord, and even an outside agent may be sharing that commission.
Remember, the more you agree to as a tenant, the bigger that commission check. The longer the lease term, the bigger the space leased, and the monthly rental amount are all factors that can drive up a bonus and motivate an agent to simply get your signature on the dotted line. After you sign a lease agreement, you may never work with or even see the agent again.
Whether a landlord-paid agent can represent two masters, you will have to decide for yourself. Brokers and agents do a great job, but who are they doing that job for and who is paying them to do it? Even the most altruistic agent can't serve two masters equally.
Meet the landlord
Frequently, the property manager, realtor or leasing representative has some influence on who becomes a tenant in a commercial property, but they have limited decision-making power when it comes to your lease. While it is not always possible to meet in person, ask to at least speak with the landlord by telephone.
Be prepared for this call, and ask thoughtful questions:
- How long have you owned this property?
- How secure is your anchor tenant's tenancy?
- Are you planning any major renovations to your property and, if so, when?
- Are you planning to sell your property?
Even if you must do most of the lease deal though the landlord's representative, you can still call this rep back to clear up a few unresolved issues at the end. Doing this an also set a positive tone for your lease term.
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