July 2011 Getting the Best Deal You Can On a Lease
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Getting the Best Deal You Can On a Lease

 
By Steve Strauss. ARCHIVE:

Last week I shared the story of an old law client of mine who got in way over his head with a bad lease. It nearly led him to bankruptcy. A main reason that he was in trouble was that he signed the "standard lease" that was presented to him by the landlord. He was told that this was the same lease that all of the landlord's tenants signed and that was that. So he signed.

Huge mistake.

Leases are also called "agreements" for a reason. Both sides must agree to all lease terms. Sure it may look standardized, intimidating even, but the fact is, if you are negotiating lease terms with a landlord, you are a hot property. Finding qualified commercial tenants these days is no easy task, and with vacancy rates in many areas still very high, potential tenants are gold.

The upshot is that the lease is probably far more negotiable than you think it is. Yes, some things won't be negotiable, but many are, including:

  • The amount of rent
  • Getting a few months free when you move in
  • Improvements before and during the term
  • The length of the lease
  • Limiting rent increases
  • Common area upkeep

As you can see, I am suggesting that most parts of the lease are quite negotiable and can be negotiated in your favor. So how do you do that?

Get a lawyer.

Look, I usually like to tell people that they often do not need a lawyer because, well, they don't. With simple documents and matters, hiring a lawyer is definitely not always necessary.

But in this case, I think it is. Hiring a lawyer when renting new space serves two vital purposes:

  1. It forces the landlord to take you more seriously. The landlord will be far less likely to try and get one past you if he or she knows you are represented by counsel.
  2. You will get a better deal. Lawyers negotiate for a living and it is probably safe to say that you do not. So bringing in a pro helps. Additionally, there are clauses and "magic words" in a typical lease that may get past you – it is not that you are dumb, it is just that there are terms that seem begnin and are really not. Your lawyer will know what these are and know what to do with them.

Yes, hiring an attorney will cost you some dough, but it should be well worth it. You will probably save that amount in first few months of your sweet new deal.

Negotiating a lease with a landlord is not all that different than negotiating the purchase of a car. The important thing is to know what you want going into the deal and to remember the rule: Everything is negotiable. The lease you are given is simply a starting point.

Indeed, if you are at the stage where you are negotiating over lease terms, then you have become a valuable commodity to the landlord. Finding qualified businesses that are willing and able to take on a commercial lease payment is not so simple. Accordingly, you may be in the power position when negotiating a lease and can ask the landlord for concessions and changes to the lease, as necessary.

You do so by doing your homework first. Find out how much similar spaces are renting for. Is the vacancy rate high or low in this area? (If it's high, you can negotiate a great deal because the landlord needs you.) If the space is vacant, find out how long it has been vacant (the longer the better for you). The more you know, the better equipped you will be to negotiate a good deal.

Once you are presented with the lease, read it carefully, and then give it to your lawyer for review. If you find some part of the lease that you or your lawyers don't like, negotiate that point. Remember that the lease was drawn up by your potential landlord's lawyer and will certainly favor your landlord. Remember too that although you might be presented with a pre-printed lease, and that it may seem difficult to change, it is nothing more than a contract, and the essence of contract law is that both sides must agree to all conditions. That, in fact, is why a contract is also called an agreement. If you don't agree, it can be changed.

Above all, try and cultivate a good working relationship with your landlord. That will go farther towards working out problems than a dozen letters from your lawyer.