Negotiating a commercial lease

While every decision in starting a business is a big one, the commercial lease is a new challenge for most start-ups. Most people are familiar with the short, standardized residential lease forms for apartments, duplexes and homes. A commercial lease is much longer and there is no universal format.

Every building is unique and every business is different. The commercial lease will reflect this. The most important thing any business owner needs to know, is do not sign something you don't understand. It may become a vital issue that could siphon profits or cause intense stress later on.

Understand the basic terms of payment

As Entrepreneur Magazine notes, most leases are written by the landlord, for the landlord. The original draft you see will likely require some work. Negotiation is key. Before you work out the finer details, you will want to make sure you understand these basic components, and that you are satisfied with your options.

  • How long the lease lasts, if you can renew the same space, and how to get out if needed
  • Who will pay for maintenance, taxes and common areas
  • Who will pay for improvements

The right lease length for you

Every aspect of a lease is important, but because each business is unique there are different circumstances based on what you do, your business plan, the building itself and the community you're in.

That said, the length of any agreement will have significant impact on your business. A long-term lease may provide stability, but it can also limit opportunity. As your business grows, you may wish for flexibility, either with the space itself or with the terms of the lease. Online financial resource The Balance recommends that a business never agree to a lease beyond two years, for example.

Businesses need to adapt

Simply stated, there are many, many variables in business. When you sign a commercial lease you're not just dependent on your business model, but on the conditions of the lease, the property you rent and the surrounding community. Outside factors can cause you to change your business plan quickly and you need the ability to adapt in order to succeed.

Because there is no standard form, and considering the high stakes of a commercial lease agreement, any new business should seek legal counsel before agreeing to terms that will affect your business operation and, hopefully, it's long-term success.

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