How do you negotiate a commercial lease?


Quick Answer

When taking out a commercial lease, a renter must negotiate the length of the lease, current rent, potential rent increases, tenant improvements, subleasing options and assignments, according to Nolo. The initial lease terms typically favor the landlord, so it is the renter's obligation to negotiate more favorable terms.

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Full Answer

The power to negotiate fluctuates greatly depending on the current state of the rental market, states Nolo. If the renter is in a hot market, the ability to negotiate is much lower. Additionally, unique spaces or hot spots indicate reduced leverage. The most important trait of the contract is the length of the lease, known as the term. Typically, shorter terms are better, as they provide the renter with greater flexibility in cases of changes. However, long-term leases often place the landlord at ease, offering stronger negotiation positions.

After negotiating the initial term, a renter and landlord decide on options to renew the lease. This is a solid middle ground that provides the renter with flexibility and the landlord with a more solid revenue, according to Nolo. Traditional contracts include one or two options to renew. After deciding on terms and options, the parties must agree on a mutually acceptable rent, as well as any potential rent increases.

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