Negotiating a commercial lease

On Behalf of | Mar 6, 2024 | Real Estate Law |

As a business owner in Florida, you may not be ready to purchase commercial real estate for your business yet. Renting commercial space might be a better option, especially if your business is just starting out.

Negotiating a commercial real estate lease is more important than you may believe. A commercial lease with terms unfavorable to you can play a major role in the success of your business.

If you have little experience negotiating leases, do not worry. That is common. Most of us are familiar with residential leases when we are renting an apartment or living space.

In those situations, we usually have little to no negotiating power. We must accept the lease as the landlord presents it to us.

You have a say in the terms of your commercial lease

Commercial leases are different. Although the landlord is still likely to present you with a proposed lease that favors them, you can negotiate better terms.

Carefully consider the length of the lease. Every situation is different, but generally a one to two-year lease is best for small businesses.

This length does not lock you into a lease for too long yet still gives you the time you need to determine if the location is a good fit for you.

You almost never have the chance to negotiate a lower rent in a residential lease, but you do with a commercial lease. However, do your homework before beginning negotiations.

Research comparable rent in your local area for commercial space. Show these to your potential landlord when discussing rent. You can do the same for your security deposit.

The type of your lease matters

Most commercial leases are either gross leases or net leases. A gross lease includes all costs while a net lease includes costs in addition to your rent.

Obtain the details about these costs and learn exactly what costs you will be responsible for. Hidden costs that you find out about after you have signed a lease can cost your business quite a bit.

Pay close attention to the termination clause of the lease. Try to negotiate terms that allow you to cure any breach before eviction. Additionally, make sure any penalties for early termination are fair and affordable.