My Lease is coming up for renewal…Now what???
Sometimes it comes up annually and sometimes it comes up every three to five years…time to renew your lease. As a business owner, here are five things to consider when the time comes to start the lease renewal process.
1 – It’s not too early – You may think it’s too early to start evaluating your options, but it’s not. Give yourself a solid year to identify relocation options, review your current renewal options, and make the right decision. Your landlord, and especially your landlord’s mortgage holder want committed tenants on long term leases. Commit to the renewal earlier than later and use that as a means to secure a lower lease rate or more favorable terms.
2 – A tenant rep WILL save you money – The agent hired by your Landlord to negotiate your renewal represents the Landlord… NOT YOU! His job is to get the Landlord the best deal possible. Hiring a Tenant Rep allows you to focus on running your business so you don’t have to handle the lease renewal process by yourself on top of everything else you’re doing on a daily basis. Your agent will do a thorough survey of the area to determine what other options are available and how lease rates at other properties compare to what you’re paying. You may not realize you’re comparing a triple net lease to a gross lease. Do you know the difference? I often compare a Tenant Rep to an attorney. You don’t go into court without your attorney so why go into a lease negotiation without your Real Estate Agent.
3 – Don’t forget those amortized fit up costs – If your rent included Fit-Up costs that were amortized over the term of the initial lease, it’s time for those expenses to drop off. Be sure your Landlord rolls your rate back and does not continue on the same schedule. Often times a Landlord will simply lump the improvements in with the base rent but you want to see those costs broken out so you aren’t continuing to pay for them well after they have been fully amortized.
4 – What about costs beyond the lease rate? – While considering all of your options, don’t forget to include costs beyond the Lease Rate you’re paying. If you’re considering relocating, you need to consider moving expenses including costs to relocate and set up I/T (phones, computers, etc…). If you’re looking at space in another city or town, utility expenses may be as much as 30% higher (or lower). You may have an offer to lease similar space elsewhere at a much lower rate but after adding up all these additional expenses, your great lease rate may not look so great.
5 – Don’t assume anything is standard – Regardless of what your landlord, the landlord’s agent, or anybody else says for that matter, you have the right to re-negotiate any and all terms of your lease when it comes time to renew. Reread your lease. Did you have a personal guarantee? Ask for it to be removed. Did your landlord include a provision giving him the right to relocate you? Ask for that to be taken out. Make sure the lease you sign is a document you are comfortable with and your attorney is comfortable with. A lease is a legally binding contract and should be scrutinized thoroughly.
What other things do you consider when renewing your lease? What would #6 on this list be? Please leave a comment below with your thoughts on other important considerations when renewing a lease.
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