Commercial real estate is quite different from a residential real estate market. Hence, it is essential to pay attention to the various clauses, nuances and other factors that will help you avoid making mistakes when you sign the office lease. In this article, we are going to discuss the major things that you should be aware of in your office lease.
1. Rent and Tenure
It is important that you choose a rent that your business can afford whether the times are good or not. If you sign an agreement when business is booming, it is easy to assume that it will always be so, and not be mindful of the rent fee. To avoid signing an office lease at a high rent fee, it is important to assess your business income generation across the past 3 to 5 years. In addition, it is essential that you ensure that you are signing a rent tenure that is appropriate for your business. A startup usually goes for a short-term lease.
2. Rental Increases
With most office leases, the rents are not always fixed. At some point, they will increase. Hence, it is essential that you read the clauses properly, so you know when the rent escalations will occur and the conditions that will trigger them. For instance, an increase may happen when the landlord’s property taxes increase. In other cases, it may increase on a yearly basis.
3. Sublease and Assignability
Some businesses struggle in between their lease and may need to sublease their office space to make generate more revenue. Therefore, it is advisable to ask for the inclusion of the sublease clause in the lease agreement. This can also be triggered in a case when you sell the business.
4. Exit Strategy
Sometimes, you want to leave the office space before the lease expires. Ensure that the lease agreement clearly defines how you can exit the building without much difficulty and losing out entirely on your original deposit.
5. Expansion
To build additional space, your lease agreement must clearly spell what expansion can be made and who will bear the cost. This will help you in case you need additional space for your growing business.
6. Zonal Laws
One of the first things you must be aware of before entering any office lease agreements is the location. There are zonal laws that are peculiar to certain locations which may affect business operations in those areas, especially when your business involves manufacturing or having a storehouse.
7. Costs related to repairs
There are other related expenses associated with leasing office space that is often not clearly spelled out when you sign a lease agreement. One of them is the cost associated with repairs. Usually, tenants are responsible for all repairs and maintenance. Nevertheless, it is essential that you have an agreement on setting a limit on how much you can spend as a tenant on maintenance.
8. Negotiation
Every item on the lease document can be negotiated. Hence, it is advisable that you work with a tenant rep so you can secure a good deal for you and your business. Some of the things you can negotiate for includes office amenities, signage, and maintenance.
9. Signage
Business is largely about marketing. The more prospects that see your business, the bigger the sales. Hence, it is important to ensure that the position of your signage is negotiated for commercial purposes. You need to know the areas where you can put your signage(s) and what kind of signage size and type are allowed.
10. Business protection
Before signing the lease, ensure that there are clauses that protect your business in the future. The clauses should indicate what would happen if there is an emergence of a zonal law that puts your business at risk in the area, or how you will be able to terminate the lease before it expires.
Office leases are about documentations. Hence, you need to avoid any assumptions about certain clauses in the agreement. Ensure that you completely understand all that is written in the document. It is advisable to involve a tenant rep to help you understand all the clauses in the lease document.
Here are a few other articles you might enjoy:
8 Terms to Look for in Your Next Office Lease
6 Tips to Avoid Leasing the Wrong Office Space
5 Tips to Keep in Mind When Leasing Office Space
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