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How Should My Small Business Negotiate a Commercial Lease?

Posted by Jonathan Krems | Apr 08, 2022 | 0 Comments

In today's Freedom Friday blog and email newsletter, I want to discuss a topic that comes up often with small business owners, and that is how to negotiate a lease for commercial space for your small business.  There are several issues a small business owner should consider in any lease agreement, especially in a commercial lease.  Here are six (6) issues you should consider before signing any commercial lease:

  1. Does the lease meet your small business's needs?

The first issue you need to consider before you sign a commercial lease for your small business is whether the lease meets the needs of your small business.  If you're opening a restaurant or a bar and need a license to serve alcohol, or there are other local regulations that are specific to your industry, you want to make sure that those functions will be able to be carried out in the leased space.  Also, if you plan to make any renovations, you need to make sure the lease agreement allows you to do so.

  1. What is the term of the lease?

The second issue you need to consider before you sign a commercial lease for your small business is the term of the lease.  The term is the length of the lease.  Every lease agreement should have a start date, an end date, and possibly options for renewal.  In some cases, there might also be a possibility for the tenant to purchase the property from the owner or the landlord.

  1. What's included with the rent?

The third issue you need to consider before you sign a commercial lease for your small business is what's included with your rent.  If your small business is looking to lease office space, some commercial leases include provisions for common areas like hallways, restrooms, elevators, and entrances.  Make sure you look at the lease and ask yourself if the landlord quotes a rental fee based on rental square footage, or usable square footage.  Rental square footage usually includes common areas, while usable square footage usually will not include that.

  1. Exclusivity

The fourth issue you need to consider before you sign a commercial lease for your small business is exclusivity.  If you're leasing space in a strip center, the last thing you need is for a competitor to open their shop two doors down.  You should make sure to address this issue with your landlord and require an exclusivity clause in your lease.

  1. Insurance

The fifth issue you need to consider before you sign a commercial lease for your small business is insurance.  Litigation is rampant in society.  If someone gets hurt in your small business, your small business will be exposed to legal liability.  Your landlord will also be exposed because the plaintiff who filed the lawsuit will go for the deepest pockets.  Both you and your landlord should carry different types of insurance, but some lease agreements will require you to carry commercial general liability coverage for the premises.  You will need to review the lease agreement to find out what coverage is required, to what extent, and whether the landlord will indemnify you if you're sued for an issue that the landlord should have taken care of.

  1. Repairs & Maintenance

The sixth issue you need to consider before you sign a commercial lease for your small business is repairs and maintenance.  The lease agreement should provide whether the landlord or the tenant is responsible for specific repairs.  For example, some lease agreements provide that the landlord will be responsible for certain types of repairs, but the tenant will be responsible for other repairs.  You need to know who has the responsibility for fixing the plumbing, heat, and air conditioning.  Also, some leases require the tenant to return the premises in original condition to the landlord, with no exception for normal wear and tear, or any damages caused beyond the control of the tenant.  These issues should be properly negotiated with the landlord in the process of negotiating the lease agreement.

If your small business is having issues with contracts, leases, business partners, collection issues, or experiencing other barriers to growth, please contact me at [email protected] to schedule a FREE strategy session.

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About the Author

Jonathan Krems

Jonathan is the Founder and Managing Attorney of Liberty Legal Solutions, LLC, a law firm dedicated to building, protecting, and defending the business and personal interests of our clients in Oklahoma.  Jonathan's primary practice areas are business law, contracts and agreements, business liti...


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