Your Checklist for Negotiating a Commercial Lease

Launching any new business is an exciting adventure. Nevertheless, you’ll need to keep your wits about you during all stages of the process, from implementing the initial idea to finding the right property and deciding whether to buy or lease.

If you decide to lease your commercial space, negotiating the terms will be one of your most significant tasks. There are countless vital details to attend to, and it can be easy to let something slip through the cracks if you’re not careful. That’s why we’ve put together this checklist to help you negotiate a lease that supports your business goals.

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Consider the Location

The old adage “location is everything in real estate” is especially true when it comes to your commercial property. To pinpoint the perfect spot, think of what it will take to get your idea off the ground. For example, do you need lots of foot traffic or is employee parking a higher priority?

Don’t forget about any rules and regulations for the building itself, not just the land it’s sitting on. First and foremost, you want to ensure you will be allowed to perform the daily operations of your business. When you know precisely what you’re looking for and where, you will have a better idea of what’s important and when you can compromise.

Still deciding whether buying or leasing your next property is better for your goals? The posts below will give you some insight:

Your Possession Date

When you take possession is a critical point of negotiation. The property owner likely wants the earliest date possible so they can begin earning rental income. However, it’s important that their schedule also aligns with your business goals.

If you take possession too early, you’ll be paying for a property you don’t need without generating any income of your own. If you wait too long, you could forfeit the unit and then have to begin your search all over again. These finer nuances are the reason why you want to ensure you have a knowledgeable commercial real estate agent to guide you through the negotiation process.

What the Lease Includes and Excludes

Be sure that you are aware of all of the inclusions and exclusions included in your agreement. For example, who is responsible for maintaining any common areas, you or the landlord? Does your rental include the parking spaces in front of the building or any storage?

While you’re doing your due diligence, it’s also a good idea to confirm the exact square footage that you will get. Otherwise, you may only get the use of a single room when you thought you had access to the entire floor. This is not the time to skim through the terms and clauses – you want to understand precisely what you are getting, when, and for how much.

The Condition of the Building

The premises might be pristine when the landlord takes you on a walkthrough. Legally, you’re entitled to take possession of the unit in the same condition as when you viewed it. However, that doesn’t mean issues never arise. Just remember that it’s a lot easier to advocate for your rights when you have all of the terms clearly laid out in writing.

What Type of Business Is Permitted Within the Building

You can never assume anything when it comes to red tape and the endless maze of business and construction permits, in addition to landlord-imposed restrictions. Before agreeing to a lease, make sure your business idea is permitted by law and zoning regulations in the first place. Failing to do so could be a costly mistake.

Who Your Point of Contact Will Be

Maintenance issues, disputes, or even simple questions are inevitable at some point during your contract. Who will you call when you need support? Also, how will you contact them, by email or phone? What is the estimated wait time before you get the answer you need? The level of support by your landlord and property management company can be imperative to the success of your business.

The Finer Details of Your Contract

The start date and the cost of the monthly rent are just the beginning of the details of your lease. The fine print will also outline how long the term is, what your renewal options are, and what penalties there might be for breaking your contract. Other details include whether or not your rental rate can increase during your term, and by how much.

All of these are essential to know so you can create a contingency plan for the unpredictable. Commercial leases tend to be more long-term than for residential accommodations. If you’re locked in, and your business doesn’t turn a profit, how long will you have to keep paying for your premises before you can walk away?

If you have access to capital, industrial and commercial real estate could be the right vehicle to grow your wealth. Learn more in the posts below:

How to Invest in Toronto Industrial Real Estate

Is Investing in Commercial Real Estate a Good Idea?

Most Lucrative Commercial Real Estate Investments in Ontario

What Renovations Are Permitted

It’s rare to find a commercial space that is ready for your operations right from the beginning. At the very least, you’ll need to perform some minor repairs and upgrade the aesthetic to match your brand. Some reconfigurations to the layout may also be necessary, such as adding or removing partitions.

Before signing your lease, be sure that there are no zoning laws that prevent you from making the required renovations and updates. While you’re at it, find out who arranges for them: you, the landlord, or the project management company?

As you can see, there’s a lot to think about when it comes time to negotiate your lease. An experienced commercial real estate agent is a must-have resource. With a trained expert negotiating on your behalf, you can be sure you are getting the best possible terms, as well as the right space to support your growing business needs.

Are you looking for more guidance for buying, leasing, or selling a commercial property? Connect with me at OMarjanovic@kw.com or call 647.620.2882 to start a conversation today.