How to Negotiate a Retail Lease: Commercial Leases 101
When I first started my business, I had no idea how to negotiate a retail lease. I was lucky enough to have a friend who was in the commercial real estate industry and she gave me some great tips.
Here’s what I learned about negotiating a retail lease. First, know your rights. Commercial leases are governed by state law, so it’s important to know your rights as a tenant. You should also be aware of any local ordinances that may impact your lease agreement.
Second, understand the terms. Make sure you know all of the terms in the lease agreement before signing anything. If there’s something you’re not sure about, ask for clarification from your landlord or an attorney.
What is a commercial retail lease?
Although you may have experience negotiating residential rental contracts, you’ll definitely want to do your homework on how to negotiate a retail lease before going into a commercial lease agreement.
The average commercial lease term is three years, while home rental terms are typically shorter. This gives you more flexibility when it comes to negotiating responsibility structures with your landlord.
Commercial leases are much more flexible than residential ones.
A well-known phrase in the real estate industry is that “Location is everything.” This is particularly true for retail businesses, as the location of a store can be the difference between success and failure.
Finding the right store location is incredibly important for retail stores. You want to find a spot that maximizes visibility, and that is also in a high-traffic area.
Now, if you’ve found the perfect space, it’s time to sign your lease agreement.
A commercial retail lease is a contract between a landlord and tenant for the use of retail space. The terms of the agreement are negotiable, but typically the lease will last for years, with an option to renew. The tenant is responsible for paying rent and maintaining the property in good condition.
If you’re making sales goals but your lease agreement is poor, you can still end up financially drained.
In this guide, we’re going to go over how to negotiate with a potential landlord. Read through the points below and keep in mind these suggestions when talking to a landlord.
What Are the Different Types of Commercial Leases?
There are four different types of commercial leases.
1. Single Net Lease or Net Lease: Tenant only pays for utilities and property taxes. The landlord pays for maintenance, repairs, and insurance.
2. Net-Net or Double Net Lease: Tenant pays for utilities, property taxes, and insurance premiums for the building. The landlord pays for maintenance and repairs.
3. Triple Net Lease: The tenant pays for all costs of the building, and the landlord pays for only structural repairs.
4. Full-Service Gross, Modified Gross, or Modified Net Lease: Tenant and landlord equally split structural repairs, utilities, property taxes, maintenance, repairs, and insurance in single base rent. This is the most common type of commercial lease when it comes to multi-tenant buildings.
If you are looking to lease a commercial space for your business, landlords will typically offer you a form that outlines the terms of the lease. This form will include a section for you to make a counteroffer.
It is always best to have a written agreement between the landlord and tenant to avoid any misunderstandings. If you are submitting a counteroffer, be sure to do so in writing (either via letter or email) so that there is a record of your proposed terms.
The terms of your commercial lease agreement can make or break your commercial real estate business.
Tips on How to Negotiate a Retail Lease
As the business owner, it is your job to read and understand your lease agreement.
A lease is a legal contract that should be closely examined before signing to make sure it is beneficial for your business.
When you are negotiating the terms of your commercial lease agreement, it is important to get everything down on paper. This will help you avoid miscommunication and ensure that you and the other party are in agreement.
This allows you to review the lease’s terms and conditions, seek legal advice, or shop around for a better deal.
Requesting that the terms be put in writing is not binding, as the agreement is not finalized until both parties sign.
Some landlords and agents may claim that a lease is non-negotiable, but in reality, all leases have some areas that can be negotiated. Don’t be afraid to go back and forth with the other party to get the best deal possible. Just be patient, because this can take a few rounds of negotiations.
If you haven’t received a response to your offer after one or two business days, it’s perfectly acceptable to follow up.
If you’re looking to lease a retail space, it’s important to understand the different types of commercial leases and how to negotiate a retail lease to get the best deal for your business. With a little research and preparation, you can be sure to get the most favorable terms for your company.