Red Flags to Avoid When Renting Commercial Space

January 28, 2016

redflags

Just as an experienced agent, solid property management company and good location are recipes for commercial leasing success, a few others can be a recipe for disaster. These red flags include inexperience, emotion and an inflexible landlord.

Inexperience

When it comes to commercial leases, just any old lawyer won’t do. You want a real estate pro experienced at handling commercial lease negotiations that also makes you feel comfortable. Review references and look for someone who may have his own entrepreneurial ventures and really knows the playing field.

Believing there is such a thing as a “standard business lease” is another place you can go wrong. Each clause in each lease is fully negotiable. Also do your homework, ensuring the location you’re eyeing is properly zoned for the business you’re running.

Emotion

Emotion can trip you up in three main areas:

  • Panic mode: Whether you were recently kicked out of your office space or set a deadline for new space that’s coming down the pike, never walk into negotiations in a tizzy. Landlords can sense desperation, and the result is not always pretty.
  • Attachment to single property: One single property does not have the power to make or break your business. Sticking firm to only one property severely limits your options while opening the door for an unfair deal.
  • Petty grudges: If you find a good deal, but perhaps are irked at the landlord for, say, not shaking your hand upon meeting, don’t let your emotions override the logic of the situation.

Inflexible Landlord

Landlords want long-term commercial leases, sometimes asking for 5 to 10 years or more. Such a huge commitment on your part, however, should come with some type of concessions on your landlord’s. Perhaps free rent for set period, or office customizations at the landlord’s expense?

Reasonable “out” clauses also need to be built into your lease, or at least the option to sublease or sell the business and assign. Pay particular attention to the out clauses related to bankruptcy, default and personal guarantees.

Avoiding inexperience, emotions and inflexible landlords can make all the difference when it comes to successfully securing a spectacular commercial space.

 

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