Jun 30, 2014 9:32:00 AM

Top 5 Tips When Negotiating Your Lease

By Don Catalano

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While lease negotiations may cover complicated legal documents that can carry millions of dollars in overall costs, turning the process around to your benefit doesn't have be hard to do. To make your negotiations successful, the key is to go in with a good strategy. Here are some tactics that you can use to help support your strategy in your next lease negotiation:

Get a Good Broker

The first step in setting up successful lease negotiations is to get the right person to help you. Attorneys might handle the actual legal document, architects plan your space and contractors configure it, but none of them ever come into play until the broker has done his work. It's the broker that finds you the space, confirms that it's reasonably priced relative to the market and that sets up the negotiation in a way that gives you the best chance of getting to the right deal for your business. Brokers bring a unique mixture of market knowledge, inside information and negotiating savvy, and going into leasing without one is, at best, unwise.

Wear Your Landlord's Shoes

Leases get signed when the underlying business terms meet your landlord's needs. While your primary focus might be on getting what is best for your business, understanding what he needs for his business can help you to understand what motivates him through the lease negotiations. With that understand, you can try to structure a transaction that gives him the business points that matter to him so that you can get those that matter to you.

Identify Outside Contributors

While choosing a community, reach out and see if anyone is there to help make your lease more affordable. Local, regional and state governments as well as some not-for-profit organizations may have money available to help fund some of the cost of your move-in, lease expenses or tenant improvements. Knowing what you can count on before you sit down to commence lease negotiations can give you a stronger position since you're able to, at least in part, negotiate with someone else's money as well as your own.

Read the Fine Print

One of the most important parts of lease negotiations is to read the lease very carefully. Seemingly small points can have an outsized impact on the overall economics of a lease.

For instance, the addition of four small words -- "capped at 3 percent" -- to the language describing a lease's inflation-indexed annual increases could save your company from skyrocketing costs if the inflation of the 1970's and 1980's returns. This is one area where an attorney can be a useful adjunct to your broker in lease negotiations.

Use the Fine Print

Whether or not you expect the landlord to read the fine print, too, using the fine print to your advantage helps lease negotiations in two ways. First, he might miss something, letting you get a slightly better lease just for writing it the right way. Second, even if he does catch the small tweaks that you made to the language, every time that he asks you to reverse something, you can ask him to give something up to your benefit. In the long run, the more that you ask for, the more that you can get.

Other great articles to check out:

7 Tools to Analyze Your Office Design

Tenant's Rights Under a Commercial Lease

The Commercial Broker: More Important Than Ever

 

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Topics: CRE Tips, Lease Negotiations, Commercial Real Estate Tips, commercial real estate, CRE

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Don Catalano

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