Friday, March 23, 2012

Negotiate, Negotiate, Negotiate

Just ahead of summarizing everything we have covered over the past 6 months, in concluding our series on ‘Commercial Leasing’ (our final post next week), let’s take a look specifically at the area of ‘negotiation’. There is an old adage which goes something like...‘successful business people do not get what they deserve, but rather what they negotiate’. Truer words were never spoken, and they very much apply to the area of commercial leasing.

In the case of Tenants, on an initial basis you need to understand the general terms and requirements as set forth by the Landlord. Once you have that outline, you need to consider your priorities/expectations, to see what sort of fit exists on this particular location. When differences are then identified, it’s time to get your ‘hardhat’ on and begin to see what sort of changes can be achieved with the Landlord.

This may be on the dollars and cents, but should include everything else important to your operation/business plan -- including lease term, restrictive convenants, first right on adjoining space, parking, signage, early termination provisions, rent-free periods, tenant allowances, change of use options, etc. Now is the time to have all of this on the table and negotiate all of the terms (beyond the dollars), which are key to your requirements going forward.

Similarly with the Landlord, they need to review the covenant/qualifications of the Tenant to see what sort of fit they have for their property. Areas such as -- corporate/personal guarantees, amortization of Tenant improvement costs, signage approval rights, sublet provisions, parking allocation, terms of renewal, and chargeback rights on major capital improvements are a short list of examples. Again, now is the time to have all of these key points on the table, so that they can be negotiated as a basis for a lease agreement.

A final note here and going back to the way in which deals get papered (Letter of Intent vs. Agreement to Lease, click here to refresh your memory), make sure that all key points are included clearly in either format. Leaving major points out at this stage only create problems later on, and often deals are lost as a result. Lease signings on a 30-40-50 page document can be challenging enough, without having major differences crop up which should have been upfront and negotiated at the outset.

Again seek out experienced commercial leasing specialists in your market, who can NEGOTIATE-NEGOTIATE-NEGOTIATE, on all the key terms required. To check out our largest office complex that we represent, click here.

No comments:

Post a Comment