Negotiating An Office Lease Or Renewal
I thought I would write about common issues that an office tenant may face when they are considering a lease or a renewal of an existing lease. I am going to discuss some of the issues that I consider when I am working with my clients o help them get the best lease possible.
My advice to all of my clients is to have the lease reviewed by an attorney of their choice. The landlord has paid their attorney to create the lease to protect their interests. A smart tenant will do the same and have their attorney review the lease.
Usually, an office lease document is given to the office tenant after they have looked at space. There are some important decisions that should be considered while looking for space:
Your biggest savings in office leasing is realized by reducing the number of square feet leased. Know exactly what you need. Use our free square footage calculator to help.
Time is money. Look for a location that is central to your employee's homes and your clients. Reducing the amount of time you and your staff spend behind the wheel commuting equals more productive office time and happier people.
For lease renewals and relocations spend some time with your staff and clients. Ask them what they like about your office and what they dislike. This information is valuable to help you make the best decision.
What are the characteristics of your best employees? Do the office building location and amenities attract this type of person to consider working for your business?
Timing is critical. If everything goes perfectly it can take 30 days to have an office lease executed. In reality, you need to give yourself sixty to one hundred and eighty days. If you a renewing your lease you should start this process at least a year prior to your lease expiration.
How do you want to design your office? This decision impacts your office lease rate, square footage, location, and density. It will save you time during your space search if you have this decision made before you look for space.
After you find your space you will receive a lease from your prospective landlord. I am not going to be able to review every one of them but you can contact me and I would be happy to go into more detail with you. Here are some lease issues that you need to consider:
Use Clause - It is easy to overlook the importance of this clause. It is there to protect the landlord so they know who is in their building. You want to have this description as broad as possible but accurately describe how you are going to use the space.
Building Rules and Regulations - This is usually an addendum at the back of the lease. It is often overlooked. You should read and understand this addendum because it can have an impact on how you will use your space. If you plan on bringing your dog to work the rules and regulations may prohibit you from bringing him to work.
Parking Clause - If you are planning to have a dense office this clause is very important. Since rental rates for office leases has increase companies are trying to get more people in less square footage. Unfortunately, parking garages were designed to accommodate anywhere from three to five people for every one thousand rentable square feet leased.
Exclusive Use - This is important to many medical office space users. If you are a chiropractor you most likely don't want a competing chiropractor next door. This clause restricts the landlord so they cannot lease to similar use.
Relocation Clause - Landlords like to have the ability to move tenants around so they can lease the maximum space in their building. If you select a space because of its location the building a forced relocation could create issues. We have ways to work around this clause to protect our clients.
Holdover Clause - This gives the landlord a tool to force a renewal decision from a tenant. When your lease expires it gives the landlord the ability to significantly increase your rental rate to encourage you to make a renewal decision.
Signage - This is am important clause if a tenant is planning on using a monument sign or any type of building signage. Expectations must be specifically outlined in the lease.
Assignment Clause - Landlords tent to give themselves this right but they don't give it to tenants. If you are planning ans selling or assigning your business you need the same rights the landlord has in the lease.
Renewal Option - This gives the tenant the ability to control their space for renewal. There will be various conditions in this clause that must be negotiated properly to help the tenant.
Events of Default - Read...Read...and Read again. It is funny how this clause has several paragraphs explaining how the tenant can default on a lease but there may only be one paragraph for a landlord. Your attornies review of this clause is money well spent.
I could write many more important issues and clauses that must be considered. I have over thirty years of experience helping tenants successfully negotiate leases and locate office space. Contact me and I can help you or answer your questions.
You may also like to read:
Steps to take for a good office sublease