Commercial Lease Pitfalls To Avoid
The commercial office lease experience can be confusing and a little intimidating. Don't let this happen to you. Be prepared before you start the leasing process and your outcome will be positive.
Simple Commercial Office Lease Steps
Leasing Goals and Objectives: You want your new office space to meet your companies best needs. To accomplish this goal time must be spent researching what you like and don't like about your present office. You must consider several things that will make your new office better:
Where your employee pool lives
What amenities do you want close to your office?
Company Growth, how many people will you hire over the next five years?
Image, do you need an expensive A class office building?
Flexibility, will you need the ability to add or reduce square footage?
Storage, can some of it be offsite in less expensive space?
Collaborative office space or private office space
What rent is affordable?
Is public transportation important?
Procrastination: Don't wait until tomorrow to do what you know you must do today. Time can be either your friend or your enemy when leasing a commercial office lease. I think that the best time to start looking for office space is seven months before you need the space. This applies to lease renewals too.
You may think that this is to much time but it isn't. Construction alone may take two to three months. This leaves an office tenant with four months to find a space, negotiate the business terms of the lease, negotiate a lease, and design the space. There is a little room in the seven months for false starts and do-overs.
Build Your Office Space Team
During month one of your seven-month office space leasing adventure, you should assemble your team. These are people that you will work with during your adventure to acquire the best commercial office lease. Generally, these people are with you until you get the keys to your next office.
Attorney: Who is the person that you are going to trust to review the landlord's attorneys work and ensure that you will not sign a lease that is detrimental to your business?
Accountant: This person will assemble your cash flow statements and balance sheet for the landlord's review and also answer any of their financial questions about your business.
Designer/Architect: Usually Architect is provided by the Landlord. It is still a good idea to have a general idea of how you want your space designed prior to the office tour. This way you will choose spaces that can fit your plan.
Tenant Representation: Don't place yourself at a disadvantage to the Landlord. Employ a office broker/tenant representative that knows the office market and the people representing the landlord. They will save you time and guide you to make the best business decisions. Their commission is usually paid by the landlord so why would you pass on this opportunity?
Office Space Inspection
When space is built and the moving trucks are lining up everybody is excited! Tenants want to move into their new office but wait. Inspect the space before you move anything into it. This way any damage found cannot be blamed upon the tenant. The tenant can make a punch list of repair items and there can be no dispute. This is the time to inspect any mechanical systems that the tenant may be responsible for, HVAC, plumbing, electrical or water lines. It is also a good idea to inspect the ceiling plenum because many leases require the tenant to clean out unused cabling when they terminate a lease and you don't want to clean up other peoples wires.
Americans With Disabilities Act and City Codes
Be careful that you don't sign a lease that states you are responsible for compliance with ADA or Code Violations. The landlord should be required to bring the space up to any code compliance required and if the space doesn't meet ADA requirements the landlord should be responsible to bring the space into compliance.
Operating Expenses/ NNN Charges
Be careful with an estimation of NNN charges. If the landlord "accidentally" quotes a number that is lower than the actual expenses the tenant pays. It is important to make sure that you have accurate numbers for all operating expenses so they are addressed properly in the commercial office lease.
Lease Review
I just finished a conversation with a local attorney reviewing a lease. I was reminded of how complicated a lease document can be for a person that doesn't read them every day. The lease document is never standard. It is usually well prepared to protect the landlord and when an office tenant executes it they have agreed to all the terms and conditions of the lease.
Every paragraph and exhibit is intentionally inserted into the lease. Don't overlook anything and make sure that you have an attorney read the lease. I promise you that the landlord did.
We have more topics to discuss on the commercial lease pitfalls in another blog post. If you found this helpful please like this page. If you have any questions we would be happy to answer them. Just contact us and we look forward to hearing from you soon.
We have more topics to discuss on the commercial lease pitfalls in another blog post. If you found this helpful please like this page. If you have any questions we would be happy to answer them. Just contact us and we look forward to hearing from you soon.