Previously, we began discussing the topic of commercial lease negotiation, and the importance of working with an experienced attorney. As we noted last time, tenants can always benefit from working with a skilled attorney who is able to help them overcome disadvantages in the bargaining process and ensure their interests are advocated.
These disadvantages can show up not only in the landlord’s default approach to negotiation, but also in specific terms of the proposed lease agreement. It is important for tenants to realize that the language of the lease controls when there is no applicable statute or rule from case law, so it is important to carefully negotiate important terms.
Cost and location are two especially important issues. With respect to cost, there is not only rent payments, but also additional fees that must be considered, such as utilities, taxes, insurance and other operating expenses. Costs associated with lease renewal and extension have to also be considered.
There is also the issue of location to consider. Obtaining a good location is important, but what exactly constitutes a good location depends on the nature of the business. For businesses that depend on high visibility and in-person transactions, getting a good location can be costly, but also beneficial. Balancing out additional costs with desirability of location is a balancing act. Part of the calculus is what kind of competition the business will have from neighboring businesses. In some cases, it may be desirable to attempt negotiation of an exclusivity agreement under which the landlord promises not to lease property to competitors.
There are a number of other important issues that should be addressed and clarified in any commercial lease. These include the terms of the lease, renewal and extension procedures and expenses, restrictions on use of the property, improvements to be made to the property.
Default and available remedies is another important set of issues. We’ll pick up on this in a future post.
