Why You Need to Negotiate Your Lease As Well As Your Rent

Toronto Commercial Real Estate small office and retail tenants chose not to consult a lawyer or an experienced consultant and many real estate brokers just do not understand leases and just recommend that tenants consultan attorney. They do not have the experience or knowledge of how to negotiate the business issues for a tenant or they may primarily work for landlords and they don'twant to do this for a tenant as it jeopardizes their ability to get or keep listingsfrom landlords. So not only will a good broker negotiate a better financial deal for youhe or she can negotiate your lease in your favour.

Toronto Landlords will say to tenants "It's our STANDARD office leasing lease and all tenants must sign it"Don't believe this! Leases are negotiable and even the weakest tenant can negotiateclauses into a lease and have clauses deleted from a lease. So, negotiate your lease!

Since leases are long, complex and printed in legalese known only to real estate lawyers and experienced tenant brokers, if you work with a landlord's broker, he or she not only doesn't want to read the lease but it's not in their best interest. They don't negotiate your lease, they negotiate for the landlord's lease interests,

If you are a smaller tenant and are assigned a "tenant rep" from one of the big commercial real estate companies you are assigned a junior who is practising onyou.

When everything goes well in an office or retail relationship, it doesn't matter what's in the lease. But when problems occur, it can be extremely detrimentalto your business and your pocketbook. This can become a major problem for you.Remember the lease you signed was designed by the landlord's lawyer. If you take some time up front to have someone who knows leases negotiate for you, youcan save huge headaches and expense. Sometimes you can even save your businessfrom failure.

Some things to look out for are:

How much your rent will be affected by inflation. Your broker can often negotiate your lease to include capson operating costs that protect you.

Renewal options, do you have to pay at least as much rent as you intially negotiatedon renewal even if rents have gone down. You do if it says so in the lease. Your only alternative may be to move.

Maintainance. Who pays for repairs to such things as air conditioning systems, heating systemsand roofs, security. What items are capital costs and which are amortized over the lease term. You don't want to move into a building and find out it needs a new roof and you are responsibleto replace it.

Subleasing your Office Space. You should be sure that you can sublease the space under termsthat are favourable to your business. It is possible that the lease may not allow you to sublet at all or with very stringent conditions.

Kick-outs. You may be able to negotiate lease terminations if you no longer need the space.This may be tied to a lump sum penalty, or an obligation for a shopping centre to keep largeanchor tenants that provide traffic for your business. You don't want to find yourself tiedinto a lease with no customers.

The Use Clause: This needs to be as broad as possible...Too narrow a use clause may meanthat as your business changes the use clause does not permit that usage by your businessas the landlord may object.

Improvements to the Office Space. You should define as accurately as possible what are fixtures andwhat are defined as leasehold improvement. In other words who owns what. Additionally, It should specify whathappens to them when the Office Space lease terminates. Almost every lease provides for you to payto have your leasehold improvements removed at the end of the lease term at your expense. A goodtenant broker is often successful in negotiating out this obligation to do so.

Heating/Air Conditioning (HVAC) It is important that the hours of operation for the HVAC be addressed, especially if you will be working in your Office Space outside the normal9:00 to 5:00 hours and on the weekend. Many buildings operate HVAC during normal business hours andyou may be responsible for costs outside these hours. If you intend to operate outside normal hours,you will want to know if this is even possible and if so how much will it cost.It may be possible to ensure that the temperatures are maintained by the landlord within a temperature range with the landlord responsible to make sure thatthis is so.

Make sure you negotiate the lease as once it is signed it is binding and you can't change things.

To 6 Steps

Negotiate Your Lease to Home Page