Commercial landlords rent out their properties to businesses that need space. They may provide retail space, industrial facilities or even office rentals. Commercial landlords may rent out an entire building or a single unit in a multi-tenant property. They can usually charge more per square foot than landlords who own residential properties. Commercial landlords also often have more complex and customized lease agreements than residential landlords.
Prospective tenants frequently come to the table hoping to negotiate concessions or unique terms in a commercial lease. The following are some of the most common requests tenants make before signing a commercial lease.
Reducing lease duration
Standard commercial leases usually last for between three and five years. Some landlords may sign leases for 10 years or longer. People starting companies are growing existing ones may be anxious about making a long-term commitment. Especially when there are other available commercial properties nearby, landlords who offer flexibility regarding lease duration may have an easier time finding new tenants than those who insist on a minimum three-year commitment.
Negotiating maintenance responsibility and costs
Some commercial landlords expect their tenants to handle most of the property management and repair issues that arise. Other times, commercial landlords provide all of those services but charge common area maintenance (CAM) fees to each of the tenants at a property. Tenants may want to negotiate the allocation of maintenance responsibilities based on their capabilities. They may also seek to negotiate the maintenance fees they pay based on the likely use of the space and the scale of business operations.
Addressing lease termination
Commercial tenants sometimes end leases early because the company fails. Other times, they want to move on from a property because the company has outgrown the space. Leases can include a number of different terms that apply specifically when a tenant wants to leave before the lease ends. Some tenants went force majeure clauses that allow them to break the lease if a situation out of their control forces the company to shut down. Other tenants may want to have a lease assignment clause included that may allow them to locate a tenant to take over or assume the duration of the lease if they leave early.
Landlords need to consider their exposure and the risk related to a specific tenant’s use of the property when responding to requests to alter the standard terms of a commercial lease. Making some concessions when negotiating a commercial lease can be beneficial, but too many concessions may leave a landlord with reduced protection and lower income. Landlords may need help reviewing proposed lease alterations and countering tenants’ suggestions with terms that actually work for them.
