What should business owners look for in a lease?

Many business owners lease a space for their company. Leasing is cheaper than a full-out purchase and can carry less risk if your business needs change.

One of the most important aspects of a potential rental space is the lease. Here are some things you should look for before signing a business lease:

An out-option

Many landlords will allow you to negotiate an option to opt-out of a lease with enough notice. This can take the form of an agreement that tasks you with finding a suitable sub-leaser for the space. It could mean you must pay an early-exit penalty.

These are all potential outs for a lease. Unless you are certain of your business’s direction and its upcoming needs, you should look for a lease with the option to opt out. You never know when your business may need to grow, expand or reorganize.

Lease length

This is another important aspect. Most commercial property landlords prefer stability, and will often grant lower rents for longer leases. A long lease can become a liability if your business is not growing or operating as you envisioned.

Imagine wanting to change locations but still having four years left on a lease. You can try to negotiate a shorter lease or ensure that out-clauses are provided.

Rent stability

Landlords will often have escalating rents in a lease contract. It’s important to understand the basis behind these, and whether they are stable or subject to change. Some unlucky business owners sign leases that are within their budget, only to see their rent obligations rise throughout the term of the lease.

Make sure any lease clearly outlines the expected costs, and what their estimated increases are. You can’t create an accurate budget without knowing what is going towards rent.

Finding the right fit

The right lease should be beneficial both to your business and the landlord. It’s important to identify what you want out of a commercial space. Your lease should be able to accommodate your business and allow you the flexibility you need to keep your company thriving.

If you have any questions around commercial leases or what to watch for, an experienced business attorney can provide guidance.

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