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Key considerations when negotiating a commercial lease agreement

| Dec 18, 2014 | Commercial Real Estate |

A commercial lease carries important rights and obligations for Arizona business owners. This post will cover a few tips for negotiating a favorable deal with a landlord.

The key negotiation points for renters are the lease term and rent amounts. Smaller operations may want to consider shorter leases, such as one- to two-year leases, with an option to renew. Including rent increase terms is also an important consideration; if possible, you should try to get an agreement rent will be fixed during the term of the lease and that increases at renewal will be limited to a certain percentage. Aside from regular rent payments, it is important to spell out which additional expenses an occupant is responsible for and which ones a landlord covers. These extra costs can include anything from maintenance fees and utilities to other hidden fees. They may be assessed either by individual meter or by square footage.

An additional provision found in many commercial leases is one holding a tenant responsible for is the maintenance and upkeep of the premises. The extent to which a tenant is liable for these expenses can vary and can often be negotiated. Tenants may also want to consider raising the issue of subleasing or co-tenancy. Some landlords may even agree to exclusivity clauses that prevent the leasing of other spaces on the property to direct competitors of the tenant. One last consideration involves setting the terms in case of the unfortunate event of a tenant’s default on payments. Landlords may vary regarding the initiation of eviction proceedings or allowing other payment options when cash flow is tight.

Regardless of the lease terms decided upon, the negotiation process is extremely important for any business owner. Consulting a commercial real estate attorney is the best way to protect one’s investment and business interests.

Source: U.S. Small Business Administration, “Leasing Commercial Space,” accessed Dec. 18, 2014

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