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Negotiating a commercial real estate lease

On Behalf of | May 6, 2024 | Commercial Leases |

A commercial lease transaction in California is often much different than a residential lease transaction. When you sign a residential lease, you typically have no say in the lease length or terms. You either accept the lease as it is or decline it if you find the terms unfavorable.

However, when you are presented with a commercial lease, it is only the beginning of a negotiation process that ultimately results in lease terms you and the landlord have both agreed upon.

Why commercial leases involve negotiation

There are a few reasons that tenants generally have a say in the terms of a commercial lease. Most commercial tenants plan to be there long-term, which means they do not want to get trapped in a long lease with bad terms.

Lease terms could sometimes mean the difference between the success and failure of your business. Additionally, commercial tenants are often responsible for more duties under the lease than residential tenants, such as performing minor repairs, mowing the lawn or shoveling snow.

Do your homework

Engage in market research before you start your lease negotiations. Review other nearby commercial spaces and learn what rent other tenants are charged. Learn about the different types of commercial leases. Some common examples are gross rent lease or net rent lease. Know the differences between these and what works for you.

Understand your business needs thoroughly. Know what you need in terms of size, location and lease term, as well as what rent you can realistically afford.

However, negotiate more than just rent and the length of the lease. Consider other lease terms such as renewal options and maintenance and repair terms.

Be ready to walk away

Finally, always be prepared to end the negotiations. You and the landlord should be negotiating in good faith, while still trying to secure the best deal possible.

Have alternative locations or options in mind and do not be afraid to let the landlord know that you are considering walking away if a satisfactory deal cannot be reached.