June 15th, 2013


Office Leasing: The Smart Tenant's Tip Sheet

There’re numerous facts in this subject written on “Office Leasing” that we might take the time to review carefully with attention so that you can acquire the most from it.

Gaining competence in lease negotiations is something not many business executives will ever achieve, since they'll probably never negotiate greater than a small number leases during their business career. Choosing to negotiate alone is risky, considering the fact that an uninformed decision has got the potential to be acutely costly. For this reason executives often decide to hire advisors such as for example real estate lawyers and brokers, to aid them in the decision-making process when it is time to lease an office.

Searching for the advice of an expert is invaluable. However, as a tenant, you also needs to gain a good understanding of the procedure to be able to be an energetic participant in the negotiating process. In the end, not all attorneys are made equal and the final thing you would like will be subject to an incompetent one. So research your facts, get informed and learn whenever possible about the key lease negotiating concepts being used today.

Whenever a landlord lets you know that their lease is standard and that everyone signs it, does which means that you should too? Be cautious, because standard doesn't necessarily mean fair for you. Before you sign, you must know in detail that which you are agreeing to. Most people dread reading leases as they are lengthy documents written in complicated legalese, however maybe not understanding that which you are signing may cause greater difficulties over time.

For example, are you aware that most leases indicate that the landlord has got the right to relocate a tenant right into a space deemed 'similar'? What goes on when the big multinational over the hall really wants to expand and dominate your space? The landlord probably had included a clause letting them move you underneath the circumstances. How much notice are they legally obliged to provide you with? Can you refuse or cancel your lease? What goes on if you accept however the moving expenses far exceed the ones that they offer to cover?

Or what about the sections entitled Additional Rent or Common Area Maintenance? Your organization could be unwittingly financing your neighbor's big blowout Xmas party.

So remember, simply because the landlord lets you know his lease is standard, it does not mean it is fair for you, the tenant. It's amazing just how many tenants can make few, if any, changes to a lease before signing it. Would you sign contracts with other vendors without reading them thoroughly?

Obviously this begs the question: Why hire an advisor at all then? Shouldn't they be looking after these details? Yes, but regrettably most tenants look for the aid of an attorney too much into the negotiation process. Often if the tenant tries to create what the landlord considers to be last-minute decisions, the landlord will end up more resistant. At this time the attorney might only have the ability to review the language of the lease, to find out whether it accurately reflects the already-negotiated business terms. Obviously your best option is the engage an established attorney right right from the start of the negotiation process, to ensure that together you are able to cover all of the important business and legal points.

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You may even consider hiring a genuine estate broker. While a reliable and experienced broker should generally have the ability to guide you through most lease clauses, doing all of your research can only just help to situate yourself in a location of power. Following are some sample items you need to take the time to investigate when taking a look at a commercial lease.

Incorporation - If your company isn't incorporated during the time of signing a lease, there might be potential issues in the future when you intend to incorporate.

Consumer Price Index - Increases in the bottom rent in many cases are tied in the customer Price Index. Be familiar with the CPI operating expense escalation clauses.

Rent Increases - You will find potentially unwarranted percentage-based rent increases that favor the landlord.

Operating Expenses vs. Property Tax - Some standard form leases have separated operating expenses from property taxes, which will be not in the tenant's favor.

Non-profit Status - You will be able to obtain financial benefits if you're a 501C corporation.

New Building - As a tenant of a newly built property, you may decide to request a 'net' or Zero dollar stop lease.

Operating Expenses - Research the most effective items that smart tenants ask to be excluded underneath the operating expenses.

Indemnification - When the landlord asks to be indemnified against everything, you should determine what your negotiating position is going to be.

Condemnation Provision - Smart tenants will often add a provision to a typical lease regarding condemnation provisions.

Landlord Services - When the landlord does not deliver necessary services, you should know what your recourse for protection is going to be.

Tenant Relocation - Your concerns as a tenant must be addressed in the lease at length regarding any kind of relocation.

Date of Possession - If the date of possession is delayed, you ought to have terms in the lease that protect you relating to your own commitments, such as if you have to vacate your present premises.

Square Footage - There's a difference between rentable footage and usable footage when it comes to the end costs for you, the tenant. It's important to understand the guidelines and know who manages the standards of measurement. For instance, if your rentable square footage increases since the building is re-measured, are you asked to pay for more rent?

Partnerships - Tenants in partnership may wish to include limitations on liability in the lease.

It is little aspects, such as this, which may aid you in your surf about “Office Leasing”. So, have a break and decide which aspects would be great for you to take.

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