Tuesday, June 2, 2009

Tips for Negotiating a Commercial Real Estate Lease

Dear Property Manager,

My husband and I are considering buying a franchise. We have both owned small businesses before, but we do not know anything about negotiating a commercial lease, what we can ask for, what is included, what are our responsibilities, etc. Can you give us a few pointers on commercial property leases?

Mary K.
Fort Mill, SC

Dear Mary K.

Depending on the type of franchise, the area director for that company may very well be able to assist you in finding a negotiating the commercial lease. Commercial tenants almost always look to their landlords to provide them more than just the right to occupy space. Landlords, (and/or the property management companies) frequently provide a number of services. The landlord may "build out" the leased space for the tenant's specific use--creating the look and feel you want and the functionality you need to run your business.

Commercial property owners will also probably provide heating and air conditioning, cleaning, utilities, and telephone and Internet services. Maintenance and repair of the leased property and the surrounding premises including the parking lots and common areas are also generally the landlord's responsibility. This includes the parking lot, pothole repair, lawn and landscape, elevators and security. These are all things that should be clearly spelled out in your lease agreement.

Now, your responsibilities is probably no more than keeping the space well maintained and paying for use of the leased space and the bundled services--and doing so on time!

To have some assurance that a tenant gets what it was told it would get and what it is paying for, every commercial lease should at least:

State in detail landlord's responsibilities to tenant. Things like when the heating and air conditioning will be on and how the property will be kept secure.

Describe what happens if the contract is broken. The lease should define what constitutes a default by the landlord and/or the tenant, as well as provide a method for a quick, inexpensive and final resolution to any disputes.

The best advice is to read the lease thoroughly and go over it with your real estate attorney. A tenant should be sure that these issues are addressed in a proposed lease to avoid any future questions or disputes.

Best of luck, and please contact Kuester if you would like to know what properties may be available in the Fort Mill area.

Property Manager

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