Negotiating commercial leases: Put your meeting in writing
Wednesday, August 01, 2018
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 his own business, savvy real estate agents and brokers are specialized sales people. 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 commercial tenant as the amount of rent he or she pays will directly affect the entrepreneur’s financial bottom line.
Whether you are leasing a new for the first time or negotiating a lease renewal for your business, here are some tips:
Termination clauses and outs
A good lease agreement from the commercial tenant’s perspective would include an early Termination Clause. Such a clause can be based on the landlord maintaining occupancy levels — especially important to increase customer traffic.
If you planned to join or have joined a franchise, the termination clause could be based on the continued success of your franchisor. Some entrepreneurs like to have the right to terminate in the case of illness or even poor sales volume.
Put your meeting in writing
Sometimes you will develop an understanding or a handshake agreement with the leasing agent, property manager, or landlord. Any/all of these individuals may be reluctant to put that agreement in writing — so you can.
As soon as possible after making the verbal agreement, send a quick letter or e-mail stating, "Further to our meeting (of such date) it is my understanding that ..." and then list the agreement. Ask for a confirmation of your correspondence so you will have something in writing.
While this is not legally binding, it does show intent.
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