Negotiating an Office Lease for Your Business

As your business grows, you will likely need to lease additional space. Many people blindly sign leases that bind their business for many years without any meaningful attempt to negotiate the terms of the lease. Learn how to negotiate a lease that works in your favor.

Most businesses require leased space. And as your business grows, you will need to add additional space. A lease agreement constitutes a significant financial commitment for a business. Yet many people blindly sign leases that bind their business for many years without any meaningful attempt to negotiate the terms of the lease.

Negotiating an Office Lease Contract

When you find a great space for the business and are ready to lease, the landlord typically hands you a preprinted agreement that looks (for all the world) just the way leases were meant to look. The landlord is likely to call this the standard lease, as if the perfect form of a lease agreement had been chiseled in stone eons ago.

Pay attention here: This form is undoubtedly totally one-sided in favor of the landlord. No "standard" lease exists. And regardless of whether the form looks standard or preprinted, don't be afraid to carefully review and negotiate the lease. Be sure to read Key Commercial Office Lease Terms for a helpful overview of what to expect in this document.

Your ability to negotiate changes to an office lease is dependent on how much leverage you have. Are other companies vying for the space? Has the space been vacant for a long time? Are you willing to pay a good rent? Let's face it: If Microsoft and General Motors are about to engage in a bidding war for the same prime space you're interested in, all of your negotiating skills mean nothing.

There are also certain terms to watch out for. In particular, look out for:

• The landlord's right to pass increased operating costs in the building on to the tenant without limitation.
• The tenant's obligation to pay any increased taxes as a result of the landlord selling the building.
• The landlord's right to terminate your lease early for his convenience.
• A disclaimer about the building and the services provided to tenants.
• Severe limitations or prohibitions on subletting your space (you may need to sublet space if your business shrinks).
• Personal guarantees or payment of the rent required from the company's owners.
• Your obligations after the tenancy terminates (Do you have to replace everything to its original condition? Do you have to pull out all cabling?)

Click here for a checklist of issues to consider when negotiating an office lease.

Research the various legal business structures available and find the right fit for your new business at AllBusiness.com.

Copyright © 1999 - 2007 AllBusiness.com, Inc. All rights reserved.