Avoid these dangers when negotiating a commercial real estate lease

Avoid these dangers when negotiating a commercial real estate lease

Landlords often push longer lease terms, offering better pricing or other incentives to sweeten the deal. Yet without flexibility, a small business locked in a long-term lease may suffer should it encounter unexpected growth or decline.

Limiting the duration of a real-estate lease to one to two years will better suit the needs of less mature businesses. A real estate lawyer in Chicago can help you negotiate renewal options with reasonable limits on rent increases.

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Avoid these dangers when negotiating a commercial real estate lease
Paying for Space Not Used

One of the most common mistakes that businesses can make is not verifying the square footage of the space. Leases are often priced by the square foot. However, landlords don’t always keep that square footage up-to-date when it is remodeled or repaired. Moreover, some landlords make measuring mistakes or intentional errors. Make sure the lease is for usable space. Be wary of a rent agreement which includes a multiplying factor requiring a percentage of common areas like hallways, elevators and lobbies.

Not Knowing Terms of Maintenance and Repair

Real lease costs depend on what operating expenses will be. Know who pays for taxes, utilities, maintenance and repair. One business was required by their lease to repair water damage several floors below when another tenant flushed a clogged toilet that overflowed. In another instance, a lease provided that the tenant doctor pay the clean-up expense from a patient’s leaking oil truck which ran into the sewers. The U.S. Small Business Administration advises both reading lease terms carefully and hiring a commercial real estate attorney.

Not Having Protection Clauses

Clauses in a lease can protect a business from unforeseen events such as:

  • Sublease: allows a business to sublet space to another business.
  • Exclusivity: prevents landlord from renting to a business competitor.
  • Co-tenancy: gives the option of breaking a lease if an anchor retail tenant closes.

A real estate lawyer can analyze the negotiation from start to finish and notice how details in the lease may affect the bottom line or even cause a business to fail. Whether leasing or purchasing commercial real estate, a Chicago real estate lawyer can help prevent dangers in negotiations.

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