A lease contract can often feel like a game in which the landlord usually has the upper hand over the tenant. This places businesses that rely on traditional office lease arrangements at a disadvantage and keeps them from being able to expand their growth. Nevertheless, as the saying goes, the devil is always in the details, and lease agreements are no exception.
With that said, we will discuss how your current office lease agreement limits your business growth, including high operational costs, rigid lease terms, and hidden fees.
Unforeseen Costs
Unplanned costs can be a major expense for businesses. It is important to be aware of the different expenses associated with leasing and negotiate carefully to reduce them. Some of these costs can include maintenance fees, utilities, insurance, water, electricity, trash removal, property taxes, and incremental increases in rent due.
Additionally, a tenant may be responsible for mandatory upgrades due to regulations or an aging building. Before signing on the dotted line, it’s always necessary to clarify who will cover maintenance expenses for tasks like landscaping and parking lot upkeep. Being mindful of these costs will help any business manage their money more effectively.
Restrictive Lease Terms and Business Growth
Lease restrictions can significantly impact a company’s ability to grow and respond to its competition. Businesses should be aware of the most common types of restrictions in a lease contract.
Commercial use restrictions limit the type of activities a business can engage in, such as operating hour restrictions. These restrictions can affect customer service hours and revenue by limiting a business’s operating hours. Property maintenance and occupancy requirements can also lead to higher costs.
As a commercial tenant, one should always try to negotiate for less restrictive terms and conditions by introducing favorable tenant provisions, such as rights of first refusal, lease extensions, and the option to expand. A business can also ask for subletting provisions, which would let them sublease part of their space.
Lease contracts are wordy documents full of legal jargon and technicalities, so it’s easy to miss hidden fees and other details. To protect yourself, familiarize yourself with the following terms and negotiate them accordingly:
1. Common Area Maintenance (CAM) Costs:
When negotiating CAM costs, avoid vague terms like “competitively priced.” Phrases like these are unclear and don’t spell out how they are to be enforced. Familiarize yourself with CAM and Triple Net Lease (N), including what they cover and their possible effect on your budget.
2. Pre-Lease Inspection:
Before signing the lease, thoroughly inspect the property to look for any hidden damages or other issues. This will ensure that any problems with the property are addressed before you move in and not leave you responsible for them later.
3. Limiting Reimbursement Obligations:
Be cautious of clauses that require reimbursement for consultant, attorney, and construction management fees. Be on the lookout for these clauses.
Negotiating Better Lease Terms with More Flexibility
To obtain the best lease deal, businesses should research the market to learn about rental rates, vacancies, tenant demand, and upcoming developments. For example, if the market is experiencing high vacancy rates, a business may be able to pay a lower rent or ask for more favorable lease terms.
A business can also consider short-term leases or early termination options. These allow a company to avoid early termination penalties should it decide to break its lease earlier than anticipated.
Other clauses to look out for include defining your termination rights and obtaining tenant termination rights. For example, a business may negotiate the right to terminate the lease early if their business needs change or if the landlord fails to provide necessary repairs or maintenance.
Exploring Alternatives to Traditional Office Leases
Given the constraints traditional office leases impose, there are better ways to manage rental costs without having to give up much. Co-working private office space memberships are one ideal way for a business to significantly reduce its tenancy costs without giving up some of its favorite amenities.
In general, shared office space centers like Onboard Coworking work on monthly membership plans that include a wide range of standard office amenities. Businesses that take advantage of private office memberships don’t have to worry about additional expenses related to maintenance, utilities, upkeep, and a wide range of other costs that typically come with a traditional office lease.
Private Office Space Membership Plans with Onboard Coworking
Discover flexible and affordable private office plans at Onboard Coworking, starting at $650 per month. Our spacious modern office building provides a distraction-free environment with premium amenities such as meeting rooms, high-speed Internet, complimentary beverages, outdoor lounge areas, and much more.
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