Category Archives: Office Lease Clauses

5 Tips For When Negotiating for an Office Space Rental

5 Tips For When Negotiating an office space rentalOffice Space Rental is one of the significant expenditures of a rising company. It makes sense then that negotiating for an acceptable lease is a challenging yet necessary process one has to take. Take note that there are several approaches you can adopt to obtain the best deal without undermining your finances or slowing down your business.  

Regardless if you hired a tenant broker, do your research on the space you want to rent. Are there other companies eyeing the property? How long has the place been empty? These are aspects that can significantly impact your negotiation process. 

And since there’s no such thing as a standard lease, you will find below five tips when negotiating the office space rental you want.  

1. Settle Length of Lease Period (Term)

Property owners or landlords are usually amenable to grant long-term leases. In a way, this condition can be beneficial; however, it’s normal for the company to adjust. When this change happens, you’ll find yourself stuck in a lease with either a sizeable or small space for your business.  

As a tenant, aim to negotiate a short-term contract with extension options. For instance, seek a two-year deal with a two-year extension option instead of a four-year agreement.  

2. Manage Rent Hikes

When it comes to office spaces, it’s unusual to find fixed rent with long-term contracts. Typically, property owners expect yearly increases based on rate hikes found in the Consumer Price Index (CPI). 

If the landlord requires rent hikes, see if you can arrange for a fixed CPI rent increase. For example, your monthly rent is $7,000 a month. Your second year will increase to $7,200 per month, then $7,400 a month on your third year.  

3. Explore Hiring a Tenant Broker

Yes, it’s common to come across stubborn landlords with unreasonable requests. If you’re in this tight situation, you may want to look for alternative office space to rent.  

A credible tenant broker, aka tenant representative, can help your company search for available spaces or industrial developments like the Gloucester business park. These professionals can give you a background and help you understand the dynamics of the market. Moreover, they can help you discover office spaces that satisfy your standards, set up viewings, and go with you to see these properties.  

Tenant brokers likewise help their clients draft offer letters and deal with property owners so you can obtain a sensible lease for your company. 

4. Discuss Office Space Improvements and Repairs

Meanwhile, please note that some contracts will include clauses that state tenants must reinstate premises to their primary condition. 

See if you can modify the provision to say that you will return the office space in the same state at the start of your contract as a tenant. This condition excludes devastation by fire that isn’t the responsibility of the tenant and usual wear and tear.  

Furthermore, if the property requires upgrading or enhancements, who is responsible for these repairs? Suppose you want fresh carpets, new paint colours, or re-arrange the layout of the office area. Take note that many leases state that tenants can only modify the property with the property owner’s consent.  

Request for a provision that allows you to render alterations with the landlord’s permission and that consent will not be unduly conditioned, hampered, or delayed.   

5. Be on the Lookout with These Provisions

Lastly, be on the lookout for these one-sided clauses that strongly favours property owners:

  • The property owner restricts potential assignment or subletting 
  • The property owner expects the tenant to settle tax escalations stemming from the property sale 
  • The property owner has the right to rescind the contract at the landlord’s convenience 
  • The property owner rents the space ‘as is’ to waive compliance with the Americans with Disabilities Act or any environmental laws.   
  • The property owner demands a personal guarantee of the principal shareholders of the business 
  • The property owner transfers to the tenant additional operating expenses such as repairs, insurance fees, and building taxes.

Final Thoughts

Keep in mind when negotiating an office space rental, it’s best you carry a definite understanding of what you’re willing to consider and what you can propose. It is also best to have a tenant representative working on your behalf. Always document everything in writing when clarifying lease details that you don’t understand. While this will make the process longer, it will provide you legal protection in cases some of your negotiated terms get excluded in your contract. 

It’s essential to study your lease carefully. The contract can possibly contain numerous details you’ll not understand. When faced with this kind of scenario, highlight each unclear point, and discuss it with your tenant broker or the property owner.  

Certified OfficeFinder SpecialistOur tenant representatives at OfficeFinder do this day in and day out for their clients. Contact us so we can connect you with one in your area. There is no cost for their services and no obligation to request info.

 

Office Leasing Tip: Parking Options

office leasing parkingAs a business owner considering your office leasing options, you probably focus most strongly on the interior of the space you are thinking of leasing, but it’s very important to consider your parking options as well. This is especially true in heavily populated commercial areas, where street parking is at a premium and many buildings have less than adequate space available for employees and customers.

Parking is an office leasing lease term that can make or break your commitment to a particular building. You must ask questions and negotiate the terms that work best for you. Although commercial office buildings are required to provide adequate parking, many older building don’t offer enough and even newer buildings may not accommodate enough vehicles during peak use periods.

Find out if parking is open or reserved. Designated spots guarantee that you and your employees will have parking available at any time. Inquire about customer parking as well. Guaranteed employee parking doesn’t include spaces for your visitors, but if you don’t have many, this may not be an issue for you.

Test the parking situation. Before you begin to negotiate the parking terms in the lease, check out how the parking works during rush hour (are there enough spots?), how easy and quick it is to reach your office suite from the lot or garage, and how secure the parking area is at various times.

Make sure that parking terms are included in the lease. Don’t rely on oral agreements or assurances, and be sure the terms are clear and detailed. Don’t accept a “parking is included” statement; specify how many spots, how much, whether they are open or reserved, arrangements for visitor parking, etc.

For many companies, parking options can be as important as the offices themselves. When considering your office leasing options, be sure your needs are covered in the lease, and that they are spelled out to your satisfaction. We can help at no cost to you. Contact us for more information.

5 Hidden Office Space Costs

hidden office space costsIf you are out in the market looking to find office space, you may have learned  plenty about office space for rent. Your head may be swimming with all the details, but now is not the time to lose your head. You need to be clear-minded when negotiating an office rental agreement. It’s one of the biggest expenses you’ll face in your business. We’ve got five hidden office space costs to be aware of when looking for an office for rent so you can be prepared when the time comes to negotiate with the Landlord.

Landlords can be quite skillful at hiding certain office space costs. You and your advisers have to be equally skillful at uncovering them and negotiating in your best interests. The first such cost is:

Base Year Expense Stop: What’s that you may ask? It all depends on the base year they want you to pay for. For example, you sign a base year contract for 2013 and in 2014, rents went up by $2 per square foot. If you have a location with 1,000 square feet, for example, then you will be paying an extra $2,000 for that location the following year. Since it’s 2015, you’ll want to negotiate for at least a 2014 base, preferably a 2015 base so you can keep your rates from going up so quickly in subsequent years on the lease.

Upgrades: A second hidden cost is paying for upgrades. A landlord may want to charge you, for example, for an Americans with Disabilities’ Act (ADA) compliant bathroom. That can cost more than $10,000. You want to get a lease where the landlord makes the space habitable for you and your clients without you paying for it.

Maintenance Costs: Thirdly, you’ve got to wonder about maintenance and upkeep costs. Who’s responsible for taking out the trash, for example? If it’s you, then you don’t have to pay for it, but you may be expecting the landlord to do this for you. If he or she does, find out how much cost is involved. Also, simple maintenance tasks should come under the landlord’s jurisdiction. You don’t want to be renting a space and always have to pay for repairs. Make sure you get it in writing before you sign and make sure the price is reasonable.

Improper Expense Cost Pass-through: Fourth, the landlord may try to charge you an inappropriate amount for operating expenses like utilities and parking lot lights. Make sure that all the expenses make sense and add up to what you should be paying. You can ask to look at samples of past utility bills to ensure that you’re not overpaying. Negotiated properly, this can save you a few dollars per square foot over the life of your lease.

Restoration Requirement: Finally, a landlord may want you to do the bulk of the work to make the place inhabitable for the next tenant. Watch the end of lease life portion of your contract. Make sure you are not expected to do major repairs. You just want to move your stuff out and that’s it. Such end of term repairs should not be your responsibility.

We hope these five tips on hidden office space costs will help you plan better to negotiate for your office rental. We hope you will contact us with questions or if you need assistance in finding your next office.

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Office Space: Details to Inspect Before Signing a New Lease

office space to rentAccording to the CoStar Group, companies are trending toward the renting of smaller office spaces and that the average space per employee has decreased from 250 square feet to 195 square feet. Office efficiency appears to be driving the downward space trend, so if you’re in the market for a new office space, make sure to thoroughly inspect the space before signing a lease to ensure it’s right for your business. Here are a few tips to keep in mind during your inspection.

Watch for Hidden Wording

You may be happy with a quick walk-through with the landlord, but there is a good reason to do a professional inspection on the space. The Small Business Administration reminds us that commercial leases can have different wording about maintenance and repair. Some could state that you are responsible for all repairs while others might specify the areas for which you are responsible. Make sure you don’t get hit with a large HVAC repair bill six months after you move into a space!

Look at the Big Picture

Here are a number of building issues that could affect you and your business. Ask for a current building inspection report from the landlord, and if it’s not available, have someone come out and do an inspection of any areas that affect your office space.

  • Parking areas in need of major repair
  • Hand rails that are loose
  • Loose roofing directly over your office
  • Signs of leaks around windows
  • Signs of pest activity on or around the building
  • Storm water not draining off the property
  • Fire hazards such as flammable materials kept next to HVAC units
  • Fire alarms and extinguishers that are not functioning

A client could damage his car by hitting a pothole in the parking lot. Or they could slip and fall on crumbling concrete stairs with a loose hand rail. You could be liable for these potential dangers, so take the proper steps to ensure they aren’t an issue.

Inspect Your Office Space

After walking through a full building inspection, you will have an idea of what you’ll need to look for in your specific space. For instance, if termite activity was spotted in the wood entry way into the building, you’ll want to bring in a professional to check your space for the same pests. The California Department of Public Health lists a number of pests that could be present in your office for which you may need to call in a professional:

  • fruit flies – sugary foods and ripe fruit attract these insects
  • fungus gnats – these are drawn to over-watered plants
  • beetles and moths – attracted to snack foods such as nuts, crackers and chocolate
  • ants – may come inside during hot summers or wet winters
  • cockroaches – most live outside but they may come inside to find food
  • rats and mice – may come inside to nest and will chew on plastic, fabric and paper

Any sign of pests on the property requires hiring an exterminator to make sure they are eliminated before they cause more damage. Signs of termites or other wood-boring insects could mean expensive repairs down the road if ignored.

The Facilities Inspection

Pay special attention to all the building’s facilities that you’ll depend on each day such as:

  • lighting and electricity
  • heating and cooling (HVAC)
  • hot water systems
  • refrigeration
  • plumbing
  • any other appliances

Is the office space well lit? Do all of the electrical outlets work? Are there any faucet or toilet leaks? A thorough inspection of the space is needed so you’ll know what to negotiate in your lease. A nice looking space could be hiding a number of repairs that you don’t notice until after you’ve moved in.

Expansion Office Lease Clause – Know What You Are Getting

You are negotiating an office lease with the landlord for the office space you have decided you would like to lease or rent. Your letter of intent, outlining the business terms, includes  an expansion option to meet your growth expectations. Hopefully you have a good office tenant representative, like the ones we have at OfficeFinder, to help you through the process. In any case, you need to understand the different types of office lease expansion options available to you. It sounds simple, but it is not.

Was the agreement for a ROFN, ROFO, ROFR or Pocket Space? They are all expansion options, but mean very different things and will subject you to very different rights under your office lease.

ROFN – Right of First Negotiation gives the Tenant very few rights other than to negotiate a new deal with the landlord. You can be assured of the expansion capability so long as you are willing to agree to whatever the Landlord is asking. In other words, you pretty much have no rights.

ROFO – Right of First Offer or Opportunity. This also give the Tenant very few rights. It simply means that you get the opportunity to be first in line to negotiate with he landlord, but once again, you are still at the mercy of the landlord and the terms he wants.

ROFR – Right of First Refusal does provide the Tenant with rights. Specifically the right to match a bona fide offer to lease within a certain period of time. This is the best option so far. you get an opportunity to meet the terms that a 3rd party is wiling to pay for the space, guaranteeing that you will get a market deal of the expansion office space.

Pocket Space is space that the Tenant commits to take either after a period of time or when they start to use it and is generally included as a part of the original office space premises. This option is good for you only if you are sure you will be growing into the additional space within the time period specified or sooner, usually within a year or two, or when you start to use the space, whichever occurs first. This can be a good option for fast growing companies by providing them with the flexibility they need to expand.

Having a clear understanding of these various terms will help ensure you are getting the office space expansion option you think you are getting. These various types of expansion options vary market by market and vary based upon market conditions. Contact us to engage the services of an experienced office tenant rep who knows the market and what options are available. It won’t cost you anything, but will save you from making costly mistakes and also ensure you get the best deal possible.

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