Commercial leases are usually long and complex, which can be quite intimidating, especially if you’re a first time tenant. A commercial lease is one of the greatest expenses a business can make. Therefore, it’s vital to take the necessary steps to ensure protection for your business.
How to set your company up for success as related to your lease agreement:
- Research Market Rents
When looking for a place to rent, it pays to do your homework. Try to find out what some of the other tenants in the area are paying. This way, you will have an idea of what the usual asking price is, and you will know right away if the landlord you’re dealing with is being reasonable. Another great idea is to check with property managers and commercial real estate brokers who handle commercial leases in similar areas. These professionals should have local knowledge or databases where they can extract this information.
- Know Your Needs
It’s important to identify what deal points in the lease agreement are most important. For example, from there, you can strategize on how to respond in proposals or direct discussions with your potential landlord. Every lease transaction has to be analyzed on an individual basis to ensure that your company’s goals and objectives are being met.
- Understand the Type of Lease
There are different types of commercial leases. Make sure you understand which type you’re dealing with. Some rental rates are quoted as an all-in cost, and some rental rates are quoted as base rent before expenses. Some leases will pay all your utilities and others will require you to set up individual accounts with utility providers.
Here are the types, as explained by Forbes:
- Single Net Lease, Net Lease: tenant only pays utilities and property tax; landlord pays maintenance, repairs and insurance.
- Net-Net, or Double Net Leases: tenant is responsible for only utilities, property taxes and insurance premiums for the building; landlord pays maintenance & repairs.
- Triple Net Leases: tenant responsible for all costs of the building, except the landlord is generally responsible for structural repairs.
- Modified Gross Lease (also called modified net lease): split structural repairs and operating expenses (property taxes, property insurance, common area maintenance (CAM), and utilities) between the tenant and landlord called ‘base rent.’
- Full Service Lease: Landlord pays taxes, insurance, CAM’s, utilities, janitorial (if applicable).
- Seek an Expert’s Help:
Seek assistance from a local commercial real estate broker who has experience representing tenants. Once a landlord knows that a tenant is being advised by a specialist, they will typically put their best foot forward on the front end. Some businesses are hesitant to seek assistance as they see this as an added cost to their business; however, landlords typically offer commissions to brokers who bring them tenants. Since the landlords are bearing the cost of any commissions owed on a lease transaction, why would you not hire someone who will protect your best interests and negotiate the most favorable lease terms?
- Ask for Favorable Clauses
There are different clauses that can be incorporated to your lease agreement that will help align you with your company’s goals and objectives. Landlords are typically open to providing certain clauses in lease agreements, you just have to ask for them. Typically, no landlord in their right mind will offer a termination option or renewal option to a tenant. With a seasoned professional at your side, there are numerous clauses that can be awarded to you in your lease agreement.
For more information on commercial real estate properties in Mississippi, contact us today!