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Negotiating Difficult Leasing Deals

When it comes to negotiating the terms of a commercial lease between landlord and tenant, things can get difficult,
particularly when you’re competing with other potential tenants. In many cases, the lease will be heavily weighted in favor of the landlord.

Leases can be over 75 pages long, with most clauses written in hard to understand language. Keep in mind that a lease with bad terms will be detrimental to your business and can cost you thousands of dollars. It can result in closure or relocation and can even cause you to get stuck in lengthy and expensive legal disputes. It’s recommended to consult with a commercial real estate specialist to assist you in negotiating a lease that will protect your interests and save you money.

If you’re a tenant negotiating a lease, you need to watch out for clauses that might affect your business in the long run. Pay attention to terms like:

Percentage Rent. This translates to an additional rental rate and it can significantly affect your bottom line. You can have it modified to a more reasonable rate or even have it negotiated off the lease altogether.

Holdover. This is how much the landlord can increase your rent should you stay past any expiration date of your lease. If this ever happens and you need to remain in your space for an extra couple of months, this can be very costly, as your rent will potentially double or triple during that time.

Radius restriction. Check what the landlord’s radius restriction is; its scope may hinder you from opening a second location for your business.

Default clauses. In the event you default on the lease, this lists what the landlord can do. Make sure you understand everything so you’ll know what steps to take to mitigate the situation if it arises.

Relocation clauses. This details the ways your landlord can relocate your business’ location on the property. Double-check the wording on this as it could cost you in the long run.

Demolition clauses. This gives the landlord the right to terminate your lease if they demolish or redevelop the property; check what compensation, if any, you would receive should this scenario ever occur.

Signing a retail lease is not a one-step task; it’s a multi- step negotiation. Read it, evaluate it and then suggest
amendments to the lease if you aren’t happy with any of the clauses. You don’t have to agree to all of the terms
proposed in the lease, and keep in mind that you don’t have to lease a property through that landlord if there are
better choices available on the market. Remember to keep your options open by negotiating more than one
commercial lease at a time and then picking the best one.

Your commercial real estate advisor will assist you in choosing which lease agreement is the better deal in terms
of protecting your interests.