How to Negotiate an Office Lease: 10 Tips
Whether you’re getting your new start-up off the ground or are an established company looking to relocate, you’ll probably need to lease office space. Once you’ve found your dream space, you might think the hard work is done. But before signing the dotted line and moving in, it’s well worth negotiating your office lease to get the best deal possible.
Real estate is likely one of your company’s biggest costs, so it’s important not to leave anything to chance. If you’ve never negotiated an office lease before, it can be difficult to know where to start. Fortunately, we’ve got ten tips that’ll help you get the best deal possible.
Keep reading to learn how to negotiate an office lease to get you the best deal.
How to Negotiate an Office Lease
Before we delve into our top negotiating tips, it’s worth going over the basics and defining what an office lease is. Also known as a commercial lease, a lease is essentially a legally binding contract between the landlord of a property and the lessee, i.e. the business tenant.
Similar to a residential lease agreement, it details the conditions in which the business tenant can use the space and how much it costs. It also contains several clauses and conditions, all of which have an impact on your business.
It’s well worth taking the time to negotiate a good deal. Overspending on rent can leave you struggling to invest in growing your business, while also leaving you vulnerable to unfavorable economic conditions.
10 Tips to Negotiate a Good Deal On an Office Lease
With the basics out the way, let’s take a look at our top ten tips for negotiating a great deal on your office lease.
1. Be Prepared & Research
As the adage goes, knowledge is power. By doing your research, you’ll be able to go into negotiations with a better grasp of your position. There are several terms of the lease that you can negotiate to satisfy your business needs. Knowing these and figuring out what you want in advance is essential.
Here are the main terms you’ll find in a lease:
- Rent fee – The fee that the landlord comes up with isn’t set in stone, and you can often negotiate down.
- Service charge – The service charge may include anything from repairs to upgrades. You can negotiate the details to ensure you’re not paying for things you don’t want or need.
- End of lease obligations – Be sure to understand what is expected of you at the end of the lease. You may be able to extend your lease if both you and your landlord agree to it.
- Subletting rights – You’ll need consent from the landlord if you wish to be able to sublet in the future.
- Repairs – If the property requires repairs, you can request that the landlord take care of them before you move in, or they may include a clause where you support the cost of repairs in return for a reduction in the lease rate.
- Break Clause – The ability to terminate the lease early without being penalized.
2. Think Long-Term
The term length is an important factor to consider. In many cases, a landlord will prefer a tenant that is willing to sign a long-term lease, as it saves them work in the long run as they won’t have to look for another tenant soon. As a result, they’ll typically be more willing to negotiate and may agree to lower costs more readily for longer-term leases compared to short-term leases.
3. Get Competitive
Even if you find your perfect space, it’s worth checking out other local options and speaking with other landlords. This essentially allows you to find out comparable rates and conditions, meaning you can better negotiate the space you really want. You’ll also have a stronger negotiating position, meaning the landlord may be more willing to negotiate.
4. Read & Read Again!
Give your office lease agreement a thorough read-through. The devil is in the details, and sometimes clauses hidden in the small print can lead to unexpected costs or other unexpected situations. When dealing with commercial real estate, it’s important to not skip any important details. Read over the lease several times and ask all necessary questions to ensure you understand everything fully before signing.
5. Get It in Writing
Keep a written record of any negotiations that take place. This way, you can be sure that the landlord knows your needs – preventing misunderstandings and unnecessary backtracking. Additionally, any agreements must be documented to ensure both parties stick to the agreement. Make sure anything extra you’ve agreed on is included in the lease before signing. Don’t sign under the promise that “X, Y, and Z will be included later” – as it probably won’t happen!
6. Check the Termination Conditions & Break Clauses
Be sure to understand how the lease can be terminated by both parties. For example, there may be clauses that terminate your lease if the landlord sells the property or if you miss a payment. You may also need to move out before the lease expires. Such scenarios should be discussed and conditions put into place to provide security to both parties. A break clause is well worth insisting on, as it allows you to end the lease early as long as you give the landlord notice.
7. Investigate Landlord’s Legal Fees
Sometimes landlords may try to include their legal fees in the service charge. This is not standard practice and you have no obligation whatsoever to pay them. In some cases, it can work in your favor to pay them to negotiate a better deal in better areas. But be sure to do the math first and don’t just willingly pay their legal fees if there’s no financial benefit to you in doing so.
8. Request Favorable Terms & Clauses
There are many terms and clauses you can request that can benefit your business. Being able to sublease the space can be invaluable if you need to downscale, and the same is true for a break clause. Other terms may include requesting the landlord make repairs, provide employee parking, or allow you to put up a sign for your business outside. So, always ask for other terms and clauses to be included if they will benefit you and your business operations.
9. Understand the Exact Costs
There are several different types of office leases and it’s important to understand the differences. A gross lease is all-inclusive, with rent, utilities, and taxes bundled together. Meanwhile, with a net lease, you’ll pay rent but will also have to pay additional costs, such as utilities. Be sure to understand exactly what you’re required to pay, especially in terms of maintenance.
10. Work With a Legal Representative
A tenant representative or a good solicitor can help you negotiate the best deal possible. Unlike you, they work with contracts on a day-to-day basis and have a firm understanding of the clauses, terms, and local market rates. Offering unbiased advice, they can help you negotiate the best deal for your business, potentially saving you cash in the long run.
The best way to ensure you get a good deal on a lease is to be prepared and do your research. Using this advice, you’re sure to come out of your lease negotiation with a more favorable lease that can give your company the necessary leeway to grow.
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