Negotiating an Office Lease for Your Business

Deciding on an office lease for your business is arguably one of the biggest decisions that you will have to make as an entrepreneur. Your office lease dictates where you will be operating and how you will be able to service your customers. Too many entrepreneurs don’t spend any time researching the methods with which to negotiate an office lease, and subsequently suffer because of their apathy.

If you find an office space that you like, and sign the lease without bothering to negotiate or at least study the terms, you might be binding yourself to an office that will only serve your business needs for a limited amount of time. Most landlords are aware of the factors that play in an office lease, and will be willing to compromise on the terms of the lease.

When you first contact the owner of an office space that you are considering for your business, he or she will most likely hand you their “standard lease”, and expect you to sign it. In fact, it will probably say “standard lease” at the top of the document, which is meant to keep you from questioning its contents.

If you read through it, however, it will most likely favor the landlord in more ways than one, which means that it’s time you learned to negotiate a lease.

In particular, there are a few points of an office lease that need to be negotiated, depending upon your specific needs.

Negotiating an Office Lease #1: Operating Costs

In the office lease, does the landlord reserve the right to pass extra operating costs on to the tenant at his or her discretion? If so, this is a point you might want to negotiate. Placing a ceiling on extraneous operating costs could save you a bundle in the long run.

Negotiating an Office Lease #2: Taxes

What happens if the landlord sells the building? Does the lease state that tenants will be responsible for applicable taxes in the event of the sale? If so, consider negotiating. Since the sale of the business is beyond your control, you shouldn’t be responsible for it.

Negotiating an Office Lease #3: Termination

If the landlord reserves the right to terminate the lease at his discretion, I would insist upon removing that clause. A termination provision offers the tenant little or no security, which is essential for the adequate operating of your business.

Negotiating an Office Lease #4: Limits of Use

Does the landlord limit the use of the building, and do those limitations have a direct impact on the operation of your business? If so, either negotiate the point or find another office.

Negotiating an Office Lease #5: Subletting Prohibitions

A clause that doesn’t give you the right to sublet your space under any circumstances is not in your favor. If your business weakens and you need to sublet to another business to make the rent, then that should be an option. Likewise, if you business grows and you must move to another, larger building before the expiration of the lease, you should be able to sublet.