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Leasing a commercial space instead of committing yourself to owning commercial real estate can be an excellent move. But there are fewer tenant-friendly laws when it comes to commercial leases, and no standard lease agreements. You'll need a lawyer's help to negotiate the best deal on a commercial lease.

Every commercial lease should be in writing and should include the following details:

• How much rent is due, including any increases (called escalations). You'll want to know the going rate for space and the vacancy rate in the neighborhood before you begin negotiating. It also helps to let the landlord make the first offer, and ask for a lower rent than you think you can get initially. Escalations should be for specific dollar amounts or tied to a known method of calculation, such as cost-of-living indexes.
• How long the lease runs (also called the term of the lease), when it begins and under what conditions you can renew the lease. A shorter lease means less commitment, but less predictability for the long run. If location is very important--for example, if you have a retail store--you may want to opt for a longer lease. You can always attempt to renegotiate lower rents or improvements as time goes on. If you have a month-to-month lease, you'll want to make sure the landlord has to give you as much time as possible when terminating the lease.
• The size, quantity and location of any signage you'll need. It's also important to confirm that your signage requirements comply with local laws governing business signage.
• Whether your rent includes utilities, such as phone, electricity and water, or whether you'll be charged for these items separately.
• Whether you'll be responsible for paying any of the landlord's maintenance expenses, property taxes and insurance costs, and if so, how they'll be calculated.
• Any required deposit, and whether you can use a letter of credit instead of cash.
• A description of the space you're renting, square footage, available parking and other amenities.
• A detailed listing of any improvements the landlord will make to the space before you move in. Your landlord may be more willing to make lots of expensive improvements if you're signing a longer lease.
• Any representations made to you by the landlord or leasing agent, such as amount of foot traffic, average utility costs, restrictions on the landlord renting to competitors (such as in a shopping mall), compliance with the Americans With Disabilities Act requirements and so forth. These may come in handy later when you want to renegotiate your lease.
• A non-disturbance agreement from the landlord's lender that promises your lease will continue uninterrupted if the lender forecloses on your landlord.
• Assurances that the space is zoned for your type of business. You'll also want to double-check this information with local zoning authorities.
• Whether you'll be able to sublease or assign the lease to someone else, and if so, under what conditions. You'll want to negotiate the ability to sublease so that you can move with as little financial pain as possible.
• How either you or the landlord can terminate the lease and the consequences.

Renewing Your Lease

When it comes time to renegotiate your commercial lease, you'll want to document your reasons for a lower rent or more space improvements with hard facts regarding lower foot traffic than represented, a downturn in your industry and so forth.

It's also important to remember that the economy can affect your negotiations. If the economy is slow, a landlord should be more flexible and willing to negotiate because they don't want to risk losing you as a tenant. For example, some landlords will even be willing to take a percentage of your sales instead of a flat rental fee when economic times are slow. On the other hand, if the economy is thriving and there's a shortage of commercial real estate in your area, your landlord may be less accommodating.

Questions for Your Attorney

As a tenant, you have far more leeway when negotiating a commercial lease than with a residential lease, which is one reason why it is important to have your own lawyer represent you in negotiations. A lawyer can also research zoning laws and local ordinances, and fill you in on local real estate market conditions and customs.

Among the questions to ask your attorney:

• Do you have prior experience negotiating commercial leases?
• What clauses in the lease are particularly unfair?
• What changes should we request to this lease?
• How much do you charge for your services?

Related Resources on Lawyers.com^sm

- Real Estate Lease - Commercial
- Renter's Inspection Worksheet
- Business Real Estate: Selecting a Good Lawyer
- Dealing with Zoning Problems
- Commerical Real Estate FAQ
- Small Business articles and information
- Find a Real Estate lawyer in your area
- Visit our Commercial Leasing message board for more help