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BUYER'S GUIDE

Tips on Negotiating a Retail Lease for Your Business

If you are looking to establish a successful business then you are going to need a good lease. The only way to avoid the need for a lease is if you decide to purchase a piece of property, or if your business can be successfully run from home. Realize that a successful lease negotiation will result in both you and the landlord being happy, however if you are unhappy you are free to walk away at any time.

Your first priority should not be making the landlord happy, but rather yourself happy. Your secondary goal is to make the landlord happy at the same time. However, if you are not happy, then you should continue negotiating, or find a different piece of property you are happy with. As you are negotiating, ensure that everything is in writing. If you agree to terms that are not in writing, then you will not be able to enforce the agreement.

If you think that, the property is almost perfect except for a few modifications, then discuss this with the landlord. If you agree to a longer lease, the landlord may be willing to bear the cost of the improvements to get the property leased. Not all landlords are willing to do this, but many are. This is a huge bargaining chip that will help you afford the expenses of the property.

One very important piece of negotiation should be the right to sublease and or assign the space. Without this clause, you would not be allowed to let someone else take over your lease if something happened. A good example would be if your business closes, without a sublease option you would still be responsible for the lease payment. However, with the right to sublease, you could rent the property to someone else, and not be forced to pay it yourself. This is a huge deal, especially for new businesses that have a very unstable future ahead of them; you want and need some flexibility when getting started.

Another important consideration is the rate of lease payment increases. While most landlords want an increase every year, you should try to negotiate at least two possibly three years without an increase. The longer you can go without an increase the better, because this is a huge savings over years. In addition, while rare it is better to usually negotiate fixed amounts for the increase, rather than using the CPI or Consumer Price Index.

Some business owners choose to also ask for a first right of refusal for additional space. This means that if any additional space opens up in your building that the landlord is required to give you the first option to lease the space before accepting anyone else. This is very important if you think you are going to need additional space in the near or even distant future. While you have the option to take the additional space, you are not required to take it. Therefore, if your business does not need it, you are under no obligation to take the additional area.

Another important issue to note is include in the lease an option to renew. This means that you will have the option of extending your lease, and cannot be forced to move. How often have you seen other businesses forced to move because the landlord will not sign another lease? This occurs far too often; insist upon this being included in your lease before you sign. This helps protect you and your business from being forced to move as you have finally established a clientele.

As you can imagine securing a good retail lease for your business is never easy. It will take several negotiations to likely work out a lease that you are happy with, but a good lease will save you a lot of money over the long term. Remember, you should be happy first, then worry about making the landlord happy.


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