Five Legal Do's and Dont's For Your Office Rental

The right space for your business can make or break your success. It’s not easy to balance pragmatism with your pocketbook and picking the perfect pad, but it’s crucial to make the right choice for your business.
Keep in mind that small businesses should allow at least six to eight months for the search process, and don’t forget to consult your attorney and commercial real estate broker before selecting your new space.
Here’s a checklist of six considerations to review before embarking upon the hunt for a new space.
1. Location
Do your research. Talk to other potential co-tenants, local business owners, and the small business community to help narrow down your decision.
When selecting a location for your business, things to consider are: Will this attract customers and employees? Does the location make sense — is it convenient, in a good neighborhood, and is competition nearby? Does it make financial sense?
A business owner must also determine if it makes sense to sign a lease by asking questions such as:
Are there any tax incentives in the state, town, or city you are considering? Check what programs your state government and local community offer to small businesses.
Due to zoning laws, will your business be prohibited from performing any activities in the area that are important to your success?
2. Mind your budget
It’s critical to understand what your base rent includes when reviewing and negotiating a commercial lease with a property manager. Determine who is responsible for maintenance and repair fees, utilities, taxes, and insurance. A “gross lease” includes those costs in the rent and a “net lease” leaves the tenant responsible for the expenses.
Also, be sure to determine whether your lease includes an annual rent hike. If so, consider requesting a flat lease with no built-in increase or negotiating for a grace period before an annual rent hike kicks in. Many underestimate the cost of rent cutting into profit margins, so make sure you can afford it.
3. Be ready for commitment
Consider the terms of your lease. Commercial leases typically run from five to 20 years, so tailor your lease to the needs of your company.
Short-term leases are a safer bet for a new business as they provide flexibility and allow you to switch properties if you find a better location. On the other hand, a landlord may provide concessions in long-term leases, such as lower rent or waived utilities fees, that would not be provided in a short-term lease.
4. The extras
Look for leases that contain subleasing and exclusivity or co-tenancy clauses.
If possible, negotiate the right to sublease your space to another tenant. Subleasing allows you to lease part or all of the property during a portion of the unexpired balance of the term of occupancy. If you must move locations earlier than expected, a sublease will give you the ability to operate within your landlord-tenant agreement without breaching the contract.
Exclusivity clauses prevent the landlord from leasing nearby spaces to one of your direct competitors and co-tenancy clauses provide a reduction in rent if a key tenant, or large number of tenants, leaves the development. For example, Macy’s is considered a key tenant. Customers who shop at Macy’s tend to shop at surrounding stores as well, such as your small business. If Macy’s leaves, it’s reasonable to assume that you might lose business. A co-tenancy clause serves to make up for the loss in revenue in this instance.
5. Room to grow
The last thing to look for in a new business location is room to grow. Can you expand within or renovate the existing space? Are other floors available for lease in the same building? Don’t limit your evaluation to this single property. Make sure there are different-sized, affordable spaces available nearby in case you want to expand or downsize but remain in the area.
By: Lisa Honey (Albuquerque Business First)
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