You must have heard before how leasing commercial real estate in Toronto is in many ways similar to leasing residential properties. There are however differences that can easily trip up a first time lessee. That explains why experts often warn first time commercial tenants of the murky waters that make up the sector. The whole process can be daunting if you have never done it. It is however exciting with the right people on board to guide you. By the time you are done with the paperwork involved, you will have learnt everything it takes for one to land on the lucrative deals. Here is what you need to know as a first time commercial tenant.
The difference between commercial and residential lease
The fact that there are differences between commercial and residential leasing does not in any way mean that commercial leasing should be complex. The whole process requires one to establish his budget, understand what he requires and be on the lookout for the best deals. Take time to calculate the amount of floor space your business will occupy, the style you need and of course, a good location. Be sure to consult a competent commercial real estate agency that can provide all the necessary details that matter when one is need of some business space in a competitive market.
Understand that you matter
It won’t take you long before noticing that commercial tenants are always given more power and respect than their residential counterparts. But then again, it won’t take you long before noticing that most commercial real estate leases favor landlords. This shouldn’t bother you at all. The truth is you are the one holding the cards. That means you can request for more negotiations or reject any lease that exudes traces of reaping you off. At the end of the day, there should be some element of professionalism in the conduct of your prospective landlord. In simple terms, utmost professionalism in the commercial real estate sector allows both parties to decently negotiate what works for them.
Lease costs and incentives
Building operational costs, cleaning and net rental are the three main categories that make up commercial leases. The factors complement each other and often affect the amount of money one will eventually pay for rent. Understanding how the three factors work is easy. When the net rental and outgoings get combined into a single figure, one ends up with ‘gross rental’. When the factors are separately listed or quoted in a clause, what one pays is ‘net rental’. The main difference is a reflection in the way the premise manager or the landlord runs the business premise you wish to let, with the total cost you pay.
Be sure to demand for more services if your rent is inclusive of all the three aforementioned factors as part of your landlord’s duties. Take note that most landlords often offer incentives in the form of rent free periods. There can only be one explanation behind such moves – commercial leasing is competitive. That is why landlords can do anything to make their premises look appealing to potential clients. Depending on market conditions the kind of incentives most of them offer can range up to 45% of lease costs in the long term.
Remember to take into account one off costs that may apply. Such costs often include legal fees for services rendered by your attorney. Insurance and bank guarantee fees also fall under one off costs so take them into account. You may also have to find from your attorney which party will bear the burden of preparing the lease and processing it to completion. All these processes need extremely competent attorneys, so don’t settle for just about any attorney. Take time to find one that will make the whole process easy.
Adapting to the premise
This is all about altering or rather modifying the business premises to suit your needs. It is not as easy as it sounds. You first have to obtain a written permission for any form of alternations you wish to make. Remember you are legal required to vacate the property at the end of your lease in the same condition you found it. Be friendly to your landlord just to make him agree to your modification proposals. Another easy way of ensuring you can modify the premise is to include an add-on in the lease that will allow you to modify the premise from time to time. Without the written permission or the add-on clause, you can easily end up with a leased business premise that is unsuitable for your business.
Breaking the lease
Most Toronto tenants don’t know this, but the landlord cannot break the lease. You will still be legally protected even if the property is sold to another party. The terms of the lease will protect you to the end of the lease. You can however be offered some incentive and be requested to leave.