Visiting Your Lease Again

June 27, 2012 by Heart Pine Business Advisors Selling a Business 0 comments

When is the last time you reviewed the lease on your business premises? When you signed it years ago? There are some important reasons that should prompt a business owner to revisit the terms of his lease. If you can’t assign your lease to a new owner, you may not be able to sell your business. A similar concern is that if you can’t assign the lease, it may cost you a lot of money. This means that the landlord may want what could be termed as a “transfer” fee; or the seller may have to reduce the price accordingly. Whether you are thinking of selling or not, it is a good idea to review your lease and the transfer of lease provisions.

It’s also a good idea to check what happens at the end of the lease. Is there an option to renew and if so, how soon before the termination of the lease do you have to notify the landlord? And, just as important, do you want to stay, or is it time to move on?

A recent article in the New York Times titled “Thinking Past Location in Finding Space” said: “With rent typically the second largest expense after salaries for small business, and with office occupancy costs up sharply in many markets, a simple miscalculation can cost an entrepreneur her business.” An existing lease may make it difficult to negotiate a lower rent with the landlord, but it may be worth a try. If the rent is benchmarked with similar businesses, a landlord may be convinced to make some adjustments. Landlords don’t like late rental payments and they especially don’t like going through the eviction process.

If you are just now looking for space for a new business or if it’s time to move into new space, here are a couple of things to keep in mind when reviewing a new lease.

The first thing to do is to find an attorney who is experienced in leases—this will be an excellent investment.
If the business requires a lot of space or if location is critical, engaging a commercial real estate broker who represents tenants is also an excellent investment.
Keep in mind that landlords want to pass on as many of the costs of leasing property as they can. Taxes, landscape upkeep, parking lot maintenance, shopping center advertising and promotion—the list is endless. The good news is that if they are looking for tenants they may negotiate on some of the items.
Always ask the landlord for enough free rent to pay for the move into the new facilities or ask to have the premises remodeled for your particular usage.
Make sure the space works for your business requirements. Is the parking sufficient? If the premises are inside a building, do the hours it is open work for your business? Do the premises have the necessary hook-ups for your needs? And, most important, does the space under consideration allow you to expand, grow – meet new requirements, etc?

By following the points outlined above, your new business or your new space should allow you to build or grow your business. If you’re in an existing space, some of these strategies may allow you to renegotiate your existing lease, or make some beneficial changes when you renew it.