Entries Tagged as 'Office Leasing Tips'
One of the things that can complicate your budget for office space rent is operating expenses. There are two ways your landlord can handle these costs. The first is simple – if it’s $12.00, he charges you $12.00 or $1.00 per square foot per month and you are done. This is known as a triple net lease (NNN). The other method is over a Base Year. This means that in Year One of your lease that $12.00 is included in your rent number, but you’ll pay the difference in subsequent years. So if your operating expenses increase by $0.25 in Year Two, you’ll pay that difference either in a lump sum or in 12 installments – it depends on your lease.
What do these two methods have in common? Uncertainty... read more
Source: OfficeFinder Miami Member
Lease Negotiations , Miami Office Space , Office Leasing Tips , Office Space , Office Space Negotiations
After you and your office tenant rep have negotiated a
lease for your office space that protects the interest of your business and is
agreeable to the property owner, it is finally time to sit down and sign the legal
document, a binding office space lease that allows you and your team to occupy
the chosen space. You should
have your tenant rep there to cover any last minute questions you might have.
Having a real estate profession in the person of your
selected office tenant rep present may seem redundant since you have sought counsel
and advice repeated during negotiations from your tenant rep. Yet, verify that
the changes you have requested to the office space lease have been worded
correctly in the final document can be tricky for those with less experience. A
tenant rep hasthe experience necessary to be sure the wording does not turn a
change made to favor your interests into a clause that could trip you up and actually
cost you money. Remember, your goal is obtain the best possible office space at
the least cost with right to require or have performed the tenant improvements
agreed upon and avoid passing rising or extra costs on to you. Another point
your tenant rep will re-check will ensure that the rent increases over time do
not become excessive.
Do not allow yourself to be rushed into signing the final
office space lease without thoroughly comparing the notes you made of requested
changes to the final document. Plan at least one to one and one-half hours for
the lease signing to allow the thorough review. Whether on purpose or
inadvertently, it is possible an important change could have been left out or
misworded, changing the intent of the verbiage completely. If any part of the
lease does not meet with the changes negotiated, stop the signing process and
require an edited lease be delivered before signing.
You should also require a property checklist which itemizes
the fixtures provided in the office space. For example, if the landlord is
providing a refrigerator or table and chair in the break area, these items
would be listed, inspected and any damages, however slight, should be noted on
the checklist. Also, all walls, flooring, ceiling, doors, service outlets, and
environment climate control units should be inspected during lease signing and
their exact condition noted. Any damage, even small dings or excessive wear and
tear, should be noted so that when you eventually relocate and release the
office space to the property owner you will not be changed for these damages.
Your tenant rep will help you go through the property and look for items
necessary for your checklist. Many landlords use a standard checklist so be
sure to note any items on the list that do not apply to the office space you
You will need to bring payment to the lease signing table
for the security deposit, any key deposits and rental payments, or whatever
other payment arrangement is outlined in the lease. Customarily initial payments
include first month of rent but sometimes rent for first and last month is
required. Sometimes if significant tenant improvements must be completed before
occupancy (be sure this is noted in the lease along with completion dates), or
the occupancy date has been established for sometime in the near future, only
payment of the security deposit may be required at lease signing with rental
payment due upon taking occupancy of the office space. Payments can usually be
in the form of a business check, money order, or certified cashiers check and
in some cases payment can be made with a personal check, debit or credit card.
Most landlords no longer accept cash due to the inherent danger of carrying
significant amounts of cash and the possible accounting confusion if business
cash becomes mixed with personal cash. Be sure to understand in advance what
methods of payment are acceptable to your landlord and arrive prepared with the
correct payment in one of the acceptable forms.
Once you and landlord have both signed the lease for your
new commercial office space it is too late for further negotiations. You will
be given keys to the property and it becomes your responsibility. You can then
pat yourself and your real estate tenant rep for a negotiating job well done.
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By: James Osgood
Lease Negotiations , Office Leasing Tips , Office Rental , Office Space
When negotiating an office space lease or rental, you may find that the
devil is hiding in some of the details and these can cost you lots of money
over the life of the lease. Turn to your office lease broker for experience
advice regarding how to negotiate out these demons before signing a contract
for office space. An old idiom says “God is in the details” which means that
anything you do should be done well. In this case, your goal is to turn those
devilish little hidden clauses into the best possible agreement with the
landlord of the commercial office space that everyone can live with for the
life of the lease.
Initially all clauses in an office space lease tend to lean
in favor of the landlord. Many of these clauses can be changed to at least give
the commercial renter a fair exchange for the rent and other fees agreed upon.
A few clauses to be on the look out for include:
Length of Lease and
Renewal Options: The initial office lease period should give you enough time to
settle in and determine how this location works for your business but not so
long that you must pay a stiff penalty if you decide to move on after two or
three years. If you do like the location and find the size just right for your
immediate future, renewal options should offer you the right to sign another
lease for a reasonable period without a huge rent increase.
Speaking of increasing rent, watch out for the clause that establishes the
amount or percentage at which rent can go up and the specific periods at which
this change can occur. Rent should not increase more than annually and should
have a reasonable cap set on it so that the cost of leasing the office space
does not become outrageous in a short period of time.
Cost Transferal: Be sure you and your office lease broker
understand exactly what costs can be passed long to you or what percentage of
those costs can be passed along. Examples can include property tax increases,
specific repair costs not caused by your occupancy and the increasing cost of
services to the building. Your rent increase should cover the costs associated
with increased service costs or taxes and only those building repairs caused by
you should be passed along to you.
Landlord’s Right to
Early Termination: Check what verbiage is used regarding what, if any,
rights the landlord has to terminate your office space lease early and what
conditions must be met to justify such early termination. If this clause is too
liberal in favor of the landlord, you could easily find yourself seeking different
office space much sooner than your business plan set forth. This can be
expensive and time consuming for your business and can be avoided with the
right wording in this area of the lease.
Corporate Owners: Watch out for verbiage indicating payment can be sought
from the corporate owners rather than the corporation itself. While some office space owners like to have
this protection in the event a business becomes financially insolvent, it does
give a landlord too much recourse into the business owners’ private finances to
allow entry into the final lease.
These are only a few of the clauses that an office space
renter should be on the alert for. Turn to your office space broker for the
best possible advice on all areas of the lease and lease negotiation process.
Office Lease Location and Negotiations
By: James Osgood
Lease Negotiations , Office Leasing Tips , Office Rental , Office Space
You’ve found a
great commercial office space rental to house your business operations and, with a great
tenant representative (like we have at OfficeFinder) and any other needed advisors such as legal and accounting counsel; you
are deep into the process of negotiating the best possible office lease for the office space location you want and need. At this point in the negotiation process take care
to identify any relocation clause in the office lease and analyze how it could
potentially impact your organization’s operation and earning potential.
What exactly is an office space relocation clause? This provision is contained in some, but not all, commercial
office space leases, and gives the landlord the right to require the tenant to
relocate their office space within the same premises in order to provide space for another tenant’s
needs. Upon learning about this clause, you are very likely to say, “How very
unfair to me and my firm!” and most tenants would agree. Keep in mind that most
provisions in any lease tend to protect and be in favor of the property owner.
For this reason, working with an experienced commercial office space tenant representative is important to protect your interests.
In an ideal
situation, the landlord will simply agree to completely remove any office relocation
clause in the office lease provisions. Some landlords, however, simply will not
completely remove this verbiage, and then very clear, legally binding
provisions must be negotiated to protect financial losses and periods of
inability to effectively conduct business on the part of the tenant. It can be
especially difficult when the property owner attempts to insist on keeping the
verbiage “at the sole option of the property owner”, allowing the office tenant no
right to refuse the request to relocate without terminating the lease at
A scenario in
which the landlord’s flexibility provided by the office tenant relocation clause could
be invoked is a building consisting of three floors of 4,000 square feet of
useable office space each. The first floor is currently empty and Tenant #1 leases
3,000 square feet of the second floor; the third floor is occupied by Tenant
#2, a smaller office requiring only 700 square feet. A new tenant offers to
lease 8,000 square feet of commercial space, but only if the office space can
consist of the entire first and second floors. Clearly there is space on the
third floor for both Tenant #1 and Tenant #2. Due to the much larger rental
income from the potential new tenant who desires 8,000 feet of space on two
floors, the landlord would find it most advantageous to require Tenant #1 to
move to the third floor, sharing that floor with Tenant #2 who will not have to
relocate. Of course, Tenant #1 may be very unhappy to uproot and relocate. If
the lease were negotiated to avoid financial impacts to Tenant #1, the move
might only be an inconvenience instead of a total disaster.
Points to be
included in the negotiations for the relocation clause of a commercial office
space lease you are considering for your enterprise should include:
- A reasonable notice period should be defined in the relocation
clause to be used as a minimum guideline.
- The landlord should bear all costs caused by the relocation,
including but not limited to finish work, painting, and moving costs.
- Office space tenant improvements completed in the original space at the cost
of the renter should be redone in a comparable and agreed upon manner in
the new location at the cost of the property owner.
- Costs associated with relocating utilities and other services
such as network wiring should be borne by the landlord.
- Expenses incurred due to changing the business address, such as
letterhead, business cards and signage, including those visible on the
exterior of the building, interior doors and directories, and outdoor
signs, should be paid by the landlord invoking the relocation clause.
- The relocation should not stop the company from doing business in
that the space in which the company will move should be completely ready
before the date of the relocation.
- If the space is less desirable for any reason, the tenant should
have the right to terminate thie office lease, attempt renegotiation of the rental charges or receive
some type of incentive for relocating.
- There should be no verbiage stating that the landlord has the
right to terminate the lease should the tenant not agree to relocate. It
could be in your best interest to negotiate verbiage stating that you have
the right to terminate without penalty should you choose not to relocate
into the space offered.
area of a commercial office lease can be quite tricky to negotiate. Your real
estate professional will help you work with the landlord to obtain a relocation
clause that both parties can agree to, should such clause be required by the
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Office Leasing Tips , Office Relocation , Office Rental , Office Space Negotiations
When Disaster Hits, You Want to Know What your Commercial
Office Lease Outlines
Disasters do happen. Hurricanes, tornadoes, earthquakes,
wildfires, mud slides – every building in every location is subject to one or
more potential natural disasters. And then there are the disasters that are the
fault of man – a truck can drive into your office front, another tenant can
cause a fire due to neglect, or faulty workmanship can result in plumbing pipes
bursting or any of several other major disasters.
Major disasters are likely to make your commercial office
space uninhabitable for a long or short period of time causing major impacts to
your cash flow and the lives of your employees. Even a minor disaster can cause
your business to be impacted for days at a time. More importantly, who is
responsible for fixing what damage in the event of a disaster not caused by you
or your employees’ neglect?
The time to learn the answers to these questions is not after the
disaster has occurred. You should discuss and review these areas of the lease
and negotiate if needed to obtain lease provisions that will protect your
business. You’ll also want talk with your insurance agent and go over policy
clauses in view of the impacts of disaster on your business.
A common but tricky provision in commercial property leases is rent
abatement. This provision states that in the event the property is damaged the
landlord will allow the tenant to suspend paying rent until the property is
repaired. Some damages covered may include fire, flood, and common natural
disasters such as tornado or earthquake, as well as any forced evacuation due
to mandate of the city or county government. The landlord’s business liability
insurance may provide coverage that will permit the owner to offer rent
abatement. Items inside the business are usually covered by the business owner
/ leasee’s liability or renter insurance.
This all sounds straightforward but problems can arise when landlords
include an addendum to the lease’s abatement provision that says if the tenant
or tenant’s employee caused the damage, the abatement is nullified and rent
must continue to be paid on-time. With this type of addendum, landlords can
double-dip by continuing to get rent from you while still collecting from their
This portion of a commercial lease requires sitting down with your
tenant representative and possibly your attorney. Be sure the lease does not
put undue liability on your business.
Perhaps the least understood points in a commercial lease are the
provisions regarding insurance. Often, at least to an extent, the tenant may be
self-insured. This fact, when found out the hard way, can be financially
bankrupting. The Chairman of the ITRA, Dr. Ronald R. Pollina, explains that
corporate tenants should consider these questions when negotiating or reviewing
- What is your risk exposure in
the event of liability or injury?
- If your leased space can’t be
used because of injury, loss of utilities, or casualty, are you still
obligated to pay rent?
- Are you or the landlord
responsible for the cost of relocation in the event of a business
Keep in mind that most leases are designed to protect the landlord
from losses. You can expect to carry property damage insurance, liability to
third parties, bodily injury, and business interruption insurance.
There are many more
insurance considerations and these should be discussed with your tenant
representative and insurance agent. Protect your business in as many ways as
practical and affordable so you don’t get stuck having to spend money over
something that could have been avoided through wise lease negotiations.
More on Disaster Recovery
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Office Leasing Tips , Office Space , Office Space Negotiations