Starting out on any new business is always a challenge. It gets worse where the market conditions are tough and competition is stiff. Fortunately, there is always a way out. With business experts by your side, you can easily avoid common challenges in just about any business venture. But that is not everything there is into any successful business. You will need a Toronto commercial real estate space to run the business. You must therefore be conversant with what it takes to negotiate commercial property leases. That is mainly because in any buyers’ market, bargaining the terms of a commercial lease is always daunting and complex. One has no choice but to be conversant with basic terms that characterize commercial leases. With that in mind, consider the following tips.
Set the terms of your lease
The amount of money you will part away with in terms of rent will be your first negotiation point. A good trick is to avoid over-committing yourself to the terms of the lease you are about to sign. Then find a way of giving yourself some long term flexibility. Experts recommend one to two year leases with the option to renew for mid size businesses. You might also want to negotiate how often your landlord should review your rent. That way, you will not have to deal with unexpected rent increases, something that can easily compromise your cash flow and normal business operations.
Involve a broker
Be prepared for a pushback and counter offers from your prospective landlord. That should be expected because no commercial space seeker ever sets the terms and conditions of the lease without involving the landlord. Most landlords often seek to lock tenants for the long term if they figure out that they can sweeten the deal with one or two clauses. That is where brokers come into the picture. Most of them understand different market conditions and tricks used by landlords as sweeteners. Be sure to go for neutral brokers. Avoid a satiation where you end up with a broker who works for the landlord as they get commissions from their brokerage services. They will definitely be biased in such circumstances.
Just as it is often the case with residential leases, expect to have lease agreements with clauses that provide how the tenant will pay for maintenance fees or upkeep of shared facilities. Most clauses often refer to such provisions as Common Area Maintenance Fess of CAMF. So the next time you see such a clause ask for clarification on just how much you will have to pay. For shared utilities such as corridors and hallways, find out how they are measured. Inquire if they are apportioned by square footage or they are individually metered. Such utilities often attract the so called hidden fees. You will only know if you ask for clarification.
Repair and maintenance responsibilities
Residential leasing often places the burden of repair and maintenance on the landlord. Commercial leases are different. The landlord owns the building. It therefore makes sense to have him or her accept liability as far as repair and maintenance needs are concerned. That never happens because commercial leases vary in their approach to repair and maintenance needs. Some are always clear that the tenant is responsible for property upkeep and repairs. Others are stringent and provide that the tenant is only system upgrades such as air conditioning, wiring or plumbing. Find out what your lease provides. Apart from stating who is responsible for what, the lease may also contain dollar limits on how much the landlord or the tenant must pay for repair and maintenance. You may need an attorney to help you understand your rights and the maximum amount of money you must pay for repair and maintenance in any situation.
Protect your business
Most tenants don’t know this but there are several ways one can protect his or her business through specific clauses. This happens where the lease is a long term lease. The trick is simple. Negotiate the following potential add on clauses:
• Sublease – anything can happen in the business world. Plans can change anytime. You will therefore need some flexibility in the clause that can allow you to sublet your entire business space or part of it.
• Exclusivity clause – this is by far the best add on clause you can negotiate. It prevents the landlord from leasing any other part of the premise to your direct competition. Always ensure the clause is there especially if you have invested so much on capital.
Default protection clauses
Like already mentioned, anything can happen in the business world. You can easily count loses and fail to pay rent on time. Make sure the lease is clear on the actions the landlord will take in such instances. Agree on whether you will be noticed on time to vacate or whether you will be kicked out immediately.