Negotiating a Commercial Lease Agreement

Commercial leases are often a long-term commitment. The terms and conditions can also be more complex than a residential agreement. As such, it not uncommon for businesses and landlords to negotiate the terms of their commercial lease.

Why should I negotiate?

Rent can often be a big expense for businesses. Negotiating can help you obtain a lease to suit your needs and circumstances. A well-negotiated lease can also help your business develop a good relationship with the landlord.

What can I negotiate?

In theory, any term in a lease can be negotiated. However, the extent to which is often dependent on the demand and competition in the market. If there is high competition for the property the landlord may be less likely to move on certain terms. This is because other potential tenants may be able to offer them a better deal. However, in a low competition market, you may have a wider scope for negotiation.

Here are some common terms which may be negotiable:

·        Length of the lease:

The length of the lease should suit the needs and circumstances of your business. Landlords usually prefer longer terms for security. But you may still be able to negotiate a shorter-term with them.

·        Rent

Rent for commercial properties is often calculated on a per-square-metre basis. Checking rent rates in the neighbourhood can help you gain an idea of an appropriate base rate. If you can’t get a discount on the base rate some landlords may be able to offer other incentives. These can include rent-free periods or a fit-out contribution.

·        Fixtures and fit-outs

Businesses often require certain fixtures to make the property suitable for use. It may be worth asking whether the landlord is willing to contribute towards the fit-out.

·        Outgoings

Unlike residential tenants, commercial tenants are often required to pay for outgoings. Outgoings can include costs for utilities and council rates. In some cases, some of these outgoings can be transferred to the landlord instead.

How to negotiate a commercial lease?

·        Analyse the market

Doing some research in the market can help provide you with a basis for appropriate rent prices. It can also give you a feel for what terms may be negotiable.

·        Allow sufficient time for negotiation

Negotiating can sometimes be a long process. Starting early can give you time to fully consider and negotiate the terms with the landlord.

·        Carry out a final inspection before signing the lease

Before you sign the lease, consider taking a look at the property in person. You may find something which you can negotiate on or could potentially change your mind.

·        Seek professional advice

It can be a good idea to seek advice from a legal professional. They can help you understand the exact terms and obligations before you sign the contract.

Talk to a Suitable Loans Commercial Real Estate Finance Broker today.

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