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Negotiating a Lease

Many clients of mine have asked me about what to look for when negotiating a lease. I spoke with a buddy of mine who owns and operates a business real estate company and this is what he says:

When trying to negotiate a deal with a landlord here are some things to consider the following:

1. Try to get a cancellation clause.

A. Remember they want to lock you in for as long as possible

B. Try something like, "O.K. I'll sign the 5 year lease but I want a one time right to cancel after 36 months..."

C. Try to have some out in the lease, be willing to add that you would pay an extra months rent if you needed to get out.

D. Or try to get a 60 day cancellation clause anyway about it build in an exit clause if at all possible.

2. Get as much free rent up front as possible, they usually have room to play here

3. Try to get the, free rent to start when you get the certificate of occupancy, this decreases the pressure on you and all of the problems that arise during the build out.

4. If you don't get free rent, try to get the rent to start after you get the certificate of occupancy.

5. Try to get renewals options. In other words if you have a 5 year lease you want the next 5 years on one year renewals where you can choose to stay or go, but they are locked in to you. If you have this option to cancel at the end of each year, if the market changes you can let them know that you are thinking of moving but would consider renegotiating the lease.

6. Try to get the renewal years as a fixed price, or as low as possible increase in rent. Landlords want to increase the rent every year, see if you can make it every two and a half years etc.

7. Landlords often try to increase the rent 3%/year, you want it as low as possible.

Of course there are many other things to look at these are just a few ideas.

One of my favorite people and awesome chiropractors Dr. Carrie Roder gave me her two cents after negotiating a deal in San Diego where the average lease is $2.85/sq' and she just got it for $1.40/sq' plus they paid for her build out!!!

She says have lots of plan "B's", don't have your heart set on any one of place and be willing to walk away. She says the key was that she walked away on several occasions because she knew she had a particular budget and she stuck to it. She is living proof!!!

Russ Rosen, D.C. - Oct 12, 2004