Tips for Negotiation of Commercial Leases

If you ever find yourself trying to negotiate a commercial lease, then you will need a viable strategy.  There are many ways to negotiate commercial leases, but the best way is by being direct and stating exactly what you want.  Below you will find some quick tips on how to negotiate a commercial lease.

Tips for Negotiation

• Limit personal guaranty to fixed time -  You need a definite date as to when the personal guaranty should expire. Personal guaranty needs to be limited to a fixed dollar amount – Setting a cap that the Guarantor is liable for saves you time, energy and money.

• Get a kick-out clause – there is flexibility when you can pay a penalty to the owner and break the lease instead of being responsible for your entire full term lease.

• Have shorter lease lengths – with a shorter lease comes a shorter liability; this also comes with the option for the tenant remain in the location for a long term.

• Have a longer grace period for being late with rent -  life happens for people and it happens for business owners as well.  In the event that a tenant’s rent is late, had he or she have had longer grace period would reduce unnecessary penalties while creating the much needed extra time for the tenant to make arrangements.

• Reduction of events of default -  this will actually lower the risk of the tenant defaulting on the lease.

• Reduction of landlord’s remedies of default – this option will limit the landlord’s options on what he or she can do should you default on your loan.  This provides you with a much needed buffer when it comes to defaulting on a loan.

• Option to rebuild – This will give you (the tenant) the option to be proactive and do your own repairs instead of waiting on the landlord.

• Shorten rebuilding time for landlord – If negotiate this then you will force the landlord to have a quicker turnaround time for repairs and getting your space back into tip, top, shape.

• Option to buy – You will probably want to negotiate this option first just to see if it is a feasible starting point for your negotiation with the landlord.

Getting Help

Hopefully the above listed tips, will give you a good starting point and quite a bit of leverage for when you meet to the landlord to negotiate your commercial lease.  When you walk in and fire some of those options off as a question, your landlord will know that you are well oriented in commercial real estate leases. However, the best way to negotiate a commercial lease is to get the help of an experienced real estate attorney- since it is his job to negotiate commercial leases, he will be able to help you get the best and most fair deal possible.