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When it Comes to Renting Office Space, The Devil is in the Details

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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.

Rent Increases: 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.

Payment from 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

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