Lease Agreement best practices
If you are just getting started with a small business, or you have outgrown your home office, you may need to start looking for office space.
Before you rush out and sign the first lease agreement that is put in front of you, you need make sure you are making the right deal. Here are some tips to help you negotiate a lease agreement that will not come back to bite you in the future
Leave Yourself Enough Time
One mistake many new business owners make is rushing out to find an office. Many times this is the result of putting the decision off until the last minute. Other times it is because the new business owner is anxious to get their office set up. Regardless of the reason, it is a very bad idea.
Finding the right location and then negotiating a good lease takes time. In fact, it could take you up to 6 months to get it right. You need to find the right location that will allow your business to thrive, and then hammer out all of the little details.
Your lease agreement is a legal contract that spells out what you can or cannot do with your office. There are a lot of little details that if you need to take the time to think through.
These are just a few items, but it gives you an idea of how important this is, and why you want to get it right. A properly negotiated lease agreement could potentially save your business thousands of dollars each year.
Get Multiple Offers
One of the most powerful tools you have in any negotiation is being willing to walk away from the deal if you are not getting what you want. Property owners do not make money when their building is sitting empty. You need to know how to use that to your advantage. One way you can do that is to create competition between property owners.
For most businesses there is not just one location that would work for your office. Many times there are several locations. It is to your advantage to explore your options with as many of these different spaces as you can. Don’t be afraid to let the property owners know you are looking at other spaces.
While property owners are still going to try to make money off of you, they will be more willing to be flexible with the lease agreement if there is a fear that you will walk away. They would rather make a little less each month than see you walk a way completely.
Everything is Negotiable
One important point to remember is that everything in the lease agreement is negotiable. The more willing you are to barter for each detail, the better your chances of getting a favorable agreement. Remember, property owners do not make money from empty offices. Unless they have a line of people that want the space, they will be willing to work deals with you.
Negotiating is a skill that can be learned. Business schools have entire courses teaching students how to properly negotiate. A lot of what they teach just takes a little common sense, and a willingness to actually ask for what you want.
Ask for more than you expect to get.
Not only should you ask for what you want, it is a good practice to ask for more than you want. If you want 6-months of no payments while you get your business established, ask for 12-months. You might get you 6-months because you were willing to compromise down. Who know, you might even get more than the 6-months you really wanted. Negotiating your lease agreement is a matter of give and take. Ask for a lot, and then compromise down to get to where you really want to be.
Know what is important to you.
One trick negotiators use is to argue over things that are not important to them. For instance, you may argue for the building owner to pay for signage, even though you already have a sign you want to use. Over the course of the lease agreement negotiations you can back off of the sign issue, and trade it for something that really is important to you, like money for renovations.
Be willing to walk away.
The most powerful tool you have is your willingness to walk away. Know what you want, and know what you can realistically afford. If you do not get those things, walk away from the deal. Many times you will get a phone call within a day or two from a property owner that is willing to reconsider.
Have It Checked by an Expert
 If you do not understand the lease language, or are unsure of every detail, then have the lease agreement checked by an expert. You cannot assume that just because you agreed on an issue during negotiations that is made it into the final lease. Compare the lease with your notes to make sure you got what you agreed on.
You can see examples of commercial lease agreements at http://www.ilrg.com/forms/commleas.html. Every lease agreement is unique, but these examples will help you to think through some of the issues that can help or hurt your business.
Your lease agreement is a legal contract. Once you sign it you are bound by law to comply with the agreement. Make sure it is right before you sign. Your new business needs the chance to grow and prosper. Don’t handcuff it from the start with a bad lease agreement.
Points to Keep in Mind…
- Identify the monthly cost of the lease.
- Find out if there are any penalties for ending the lease early.
- Everything in the lease can be negotiated.
- Make sure you are getting everything you are paying for.
- Have your lease agreement reviewed by an expert before you sign.
- Be prepared to walk away if you are not satisfied with the arrangement.
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