A few words here and there can have a big impact on how your lease impacts your business. Paying close attention to these four lease terms and the way that they are drafted can help you keep your good spaces and get out of your bad ones before they start to harm your bottom line and your success.
Renewal Options
In a space that works well for your business, you could argue that the most important lease terms are those that define your renewal options. Having the ability to renew your space without having to compete or renegotiate gives you some of the stability of ownership with all of the flexibility of leasing. The best renewal options have fixed rent increases. If you have already negotiated that your rent will go up 5 , 10 or 15 percent when you take a new option, you end up with two choices.
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If the market rent is higher, you take the option and enjoy lower-than-market rent for the entire option period.
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If the market rent is lower, you let your landlord know that you'd be willing to stay but that you will only re-up at 95 percent of market. He'll thank you since you saved him from having vacancy and having to pay commissions and tenant improvements for a new tenant.
Either way, you win.
Subletting and Assignment
When things don't work out, it's important to have a way to get out of your lease. Generally, buyout clauses won't be that generous since the landlord will want to be able to count on the income that you originally promised. As such, the more important lease terms are those that deal with assignment and subletting. The more rights that you can get to to turn your space over to someone else, the better.
Although a lease that grants an unlimited right to assign your responsibilities and completely get off the hood is going to be hard to negotiate, getting the right to sublease your space with little interference from the landlord is important. If possible, try to get the right to keep your options if you vacate. That way, you can offer long-term subleases and potentially attract more tenants including those that would be shopping for your space if it came available as direct lease space.
Rules and Breaches
Pay careful attention to all of the lease terms that define the building's rules and its requirements. These terms can determine whether or not a competitor can come in next door to you, what types of businesses can share the building (does your accounting firm want to be next to a dental practice?), and how parking gets divvied up. While some building rules might limit your options, they also help to keep your co-tenants in check.
Along with the rules, read the lease terms that define landlord breaches carefully. Having the ability to withhold rent can be a valuable option if the landlord isn't enforcing the rules. On the other hand, the right to cancel your lease in the event of a landlord breach might not be as valuable since he might want you out of the building to accommodate a different tenant.
Signage Rights
While the building's overall rules impact your tenancy, its signage impacts your brand. For better or for worse, the names on your building affect your employees', vendors' and clients' impression of you. Getting signage rights of your own is great but, barring that, confirming that the management can't just slap any name on the building, can turn out to be just about as valuable.
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