Congratulations! Your business is growing, and you need to find the right place. Where do you start? And what should you be looking for when scouting locations?

To make the most of your commercial lease, you need to understand how they work. Commercial leases often have many moving parts. For example, the owner and tenant frequently split property taxes in commercial real estate. There may also be a clause or two that stipulates what happens if one party fails to pay rent.

Start by researching similar contracts in your area before you walk into an office, ready to sign on the dotted line. Pleading ignorance won’t buy you much sympathy. Here are five essential factors that you might consider as part of your decision-making process:

Location, Location, Location

You might be familiar with the real estate phrase — location, location, location. The location is critical with any commercial lease. Location can affect the cost of your lease, what type of lease you sign, and how long it lasts.

• Suppose a landlord has several investors interested in their property, and one is willing to pay more than another for the exact location. They may be inclined to give that investor preferential treatment because they’re willing to pay a higher price, leading him to offer an extended lease or other perks (like free rent).
• Another scenario includes several businesses vying for one particular space with similar budgets. In that case, one may spend more effort than another when negotiating terms like rent or length of stay, resulting in favorable terms for that business over others without enough resources left over after paying their rent each month.

Term Lease

The length of the lease is also a significant factor to consider. Depending on the type of business, this will dictate how often you have to renew your lease and how long the renewal process takes. You may also want to make sure that you can sublease the space if necessary.

The renewal terms are critical and require some serious thought before signing any contract. In many cases, landlords will try to lock tenants into long-term leases (usually five years or more) with little room for negotiation on either side — so be sure that what they’re offering is as good as they say!

Maintenance

Maintenance includes anything that requires repairs, cleaning, or part replacements. You will be responsible for paying for any necessary maintenance unless your lease states otherwise. Therefore, it’s important to know what kinds of maintenance are required and how much it costs so you can plan and budget appropriately.

For example, if you have a 200-square foot parking lot that needs to be repaved every five years at the cost of $15 per square foot (which would equate to $3,000). In that case, it would make sense for you to include this expense in your budget, but also consider whether there are ways — like buying used equipment — that could help reduce those costs while still maintaining the quality of the project.

Accessibility

Accessibility is the ability of a business to accommodate its customers with disabilities. Therefore, it’s crucial to understand how accessibility will affect your business and how to ensure that all people have equal opportunities when accessing your services.

Accessibility includes physical access and reasonable accommodations for those with disabilities based on the Americans with Disabilities Act (ADA). For example, if there are stairs in your restaurant, it’s not accessible. However, if there are ramps and elevator access, it may be.

When drafting leases for businesses that provide goods or services directly to customers (rather than selling them wholesale), landlords usually include clauses requiring tenants to comply with relevant laws relating to accessibility in their leased space.

Make sure these requirements are explicitly spelled out in your lease before signing any agreements.

Your Obligations

As the tenant, you have certain obligations to the landlord. The most important of these is paying rent on time, every time. You must also keep the property in good condition, including complying with all applicable laws and ordinances and not allowing unauthorized persons on the premises.

If you fail to fulfill your obligations under a commercial lease agreement, serious consequences, including eviction and fines that can cost thousands of dollars per day, might be exacted. Therefore, when signing a commercial lease agreement, it’s essential to understand what both parties are obligated to do under the terms so that neither side is surprised later on if things go wrong.

Connect2Capital Helps Businesses Grow and Thrive

Hopefully, these tips will help you when you need to negotiate a commercial lease for your business. Make sure you have an idea of the space you need and can afford, but also be flexible enough so that if something better comes up along the way, unexpected costs or constraints don’t catch you off guard.

Connect2Capital offers advice on how to help your business grow and thrive, whether you’re searching for tips on commercial leases or seeking other strategies to help your business succeed. In addition, it helps small business owners who may have difficulty procuring funding from mainstream lenders connect with mission-driven lenders that offer affordable financing.

For more assistance in helping your business succeed, complete this inquiry form to start the matching process between small business owners and lenders.

The information in this blog is for general informational purposes only and may not reflect the most current resources and recommendations available. Please consult with your financial, tax, legal, and other relevant advisors when making decisions about your small business.