Avoiding pitfalls when negotiating a business lease

As a business owner, you need to find the perfect office space. You need to find a place that offers the amenities and space you need, while also being well located for employee travel and accessible to your customers. It’s not always easy, so it’s tempting to jump right into signing a lease when you find a commercial property that ticks a lot of boxes. However, there are a few things you should think about beforehand.

Things to think about when taking out a business lease

• Be prepared to wait – Do not make the mistake of assuming that you will find an office space on the first day you start your search and that you will move into it before the end of the month. Entering into a business lease takes a lot of time, and often takes a lot longer than people think. Not only does finding the perfect space take a lot of time – don’t be surprised if you view dozens of properties before you find the one that’s right for you – but setting up and preparing everything can be time-consuming, especially if you’re planning on fully furnishing.

• Think about your business needs – You need to find a property that is in line with the needs of your business, regardless of how specific and niche those needs are. Think about the location and layout of the property and decide whether it has all the necessary amenities. You don’t want to move in and then suddenly realize it’s lacking in a key area. It is better to wait until the perfect property comes along than to settle for one that you are not completely satisfied with.

• Choose the right rental length – Lease length is a bit of a balancing act and is something that confuses many business owners. You won’t want a lease that’s too short, as there’s always the risk of it not being renewed, which can be extremely disappointing after you’ve invested a lot of time and money into making the space your own. But you also won’t want too long a lease because you could find yourself stuck in a business space you’re ready to leave. When negotiating a commercial lease, you need to strike a balance somewhere in the middle.

• Familiarize yourself with the rental conditions – When renting office space, you must be fully aware of every aspect of your lease. This means you know what you’re paying for, how much you’ll be charged if you pay late, and how often your rent amount will be reviewed. Rental terms can be complex and are something that many people struggle to navigate. Take the time to make sure you understand everything you’re applying for, including extra fees and charges. You don’t want to negotiate a commercial lease only to find out that it will cost you more than you think when you move in.

• Be aware of unexpected costs – There can be unexpected costs hidden within a commercial lease, so be sure to do your research before you sign on the dotted line. Things like insurance, utilities and service charges all add up. If you can, negotiate the terms of the lease to make sure the extra costs are within your budget.

• Know how to transfer a lease – There will come a time when you want to move on. This may be because your business has outgrown the commercial space or simply because you are ready to experience running a business from somewhere else. Before you commit to a lease, make sure you know how to transfer your lease when yours comes to an end. Find out if there are costs, what conditions must be met and what happens if you want to end the lease early.

• Understand repair and maintenance responsibilities – Things can go wrong in a commercial space, even if the property itself is relatively modern and well maintained. You need to know who is responsible for fixing everything from leaky faucets and squeaky doors to faulty electricals and broken windows. Sorting out repair liability early can save you from unexpected costs and disputes down the road. Be sure to agree on the details of who is responsible for what and document the condition of the property at the start of the lease. It’s a small step that could prevent bigger problems in the future, giving you ‘proof’ of any problems in the property that existed before your company moved in.

• Negotiate early exits – You’ll certainly be excited about moving into a new office space, but something could happen that means you have to leave before your lease is up. When negotiating the terms of the lease, include some flexibility around early terminations. You may not be thinking about leaving early right now, but you’ll appreciate the flexibility if you end up having to shorten your lease.

• Understand rental reviews – A rent review can be nerve-wracking, especially if you’re worried that it will be increased to an unaffordable amount. To avoid surprises, make sure you fully understand how and when your rent may be adjusted. Be prepared to negotiate and ensure that any changes are fair and acceptable to your business.

• Always be prepared – You never know how the business lease will go, so you should be prepared for unexpected challenges, financial obstacles, and even disagreements with the landlord. This doesn’t mean that any of these things are guaranteed to happen, but you need to be prepared in case they do. Planning ahead and clear communication can help minimize the impact of potential downtime, keeping your business moving forward, even when challenges arise.

Sign up for our newsletter to find out the latest news from business advice.