Issues to Consider When Negotiating a Commercial Lease in Florida
If you own a business, you will likely have to sign a commercial lease at some point. A commercial lease is a contract in which a landlord agrees to let your business occupy a space for a certain amount of time, you agree to pay rent for a certain amount of time, and you and the landlord agree to abide by other conditions laid out in the lease.
That may sound simple, but commercial leases can be complex and confusing. There is no standard agreement for commercial leases, and landlords and tenants have different perspectives and different interests. Keeping in mind those facts, here are some important issues to consider when negotiating a commercial lease.
Starting the Process
To start the process, the landlord will present you with a lease that has been written by the landlord and/or an attorney. Remember that there are no standard leases and that there is always room to negotiate; the landlord’s lease is simply a starting point from which you can negotiate changes.
Length of Lease
The length of a lease—also known as the “term”—is an important part of any commercial lease. A short-term lease is often beneficial to you as a business owner, as a shorter lease give you flexibility if your needs or the needs of your business change. A landlord will often make more concessions for a tenant who agrees to a long-term lease, however, so there is a trade-off. Thus, a good solution may be to bargain for a short initial lease with an option to renew.
Rent and Rent Increases
Of course, rent is another important factor. You should compare rates for similar spaces before settling on one. Some commercial leases may include annual increases to your rent. If so, you should try to negotiate a cap on the amount of each increase and/or a grace period.
You should also be aware of who will be responsible for paying for utilities, repairs, taxes and insurance. The following is an overview of the different types of leases:
- In a gross lease, the landlord pays for utilities, insurance, taxes and repairs. Rent might be higher with a gross lease, but the tenant will pay the same amount each month;
- In a net lease, the tenant pays the rent as well as utilities, insurance, taxes and repairs;
- In a double net lease, the tenant pays the rent and pays the landlord for insurance and property taxes; and
- In a triple net lease, the tenant pays the rent and pays the landlord for the cost of utilities, insurance, taxes and repairs.
You might want to make alterations to the space you are renting, and the landlord might be willing to negotiate regarding who will pay for such alterations. Whether a landlord is willing to pay often depends upon what alterations will be made and the length of your lease.
Negotiating for alterations often involves resolving the following issues:
- What alterations will be made?
- Which party will pay for the alterations?
- Which party is responsible for having the work performed?
- Will the tenant restore the space to its original condition when moving out?
You may want to ask for the right to sublease or assign the space you are renting, as the ability to do so will prevent you from being locked into an agreement without the ability to offset costs.
Most commercial leases include terms about the permitted use for the space. It may be beneficial for you to negotiate broad usage terms.
The list of considerations included here is by no means exhaustive. Because of the importance and complexity of commercial leases, it is important that business owners consult with an experienced attorney before signing a commercial lease. Contact the Law Offices of Larry E. Bray, P.A. in West Palm Beach or Boca Raton today for a consultation.