Leasing space for your business? Know your rights as a renter
Negotiating a lease can be intimidating for small business owners, who often don’t realize they can barter over more than just monthly rent. But many landlords are willing to compromise on maintenance fees, the percentage of annual rent escalation and other provisions, says Norfolk attorney Alyssa C. Embree, a real estate specialist who will speak at a free class this month.
“Lease Negotiations,” hosted by the Retail Alliance, is from 8:30 a.m.to 9:30 am. Oct. 23 at Virginia Company Bank in Hampton. The event is part of the alliance’s Retail Roundtable, a series of educational breakfasts held monthly throughout Hampton Roads.
“Many retailers do not think to ask any questions of their landlord and do not feel empowered to negotiate,” said Sarah Kingsley, Retail Alliance events coordinator. “I also think they are worried about the cost of consulting an attorney.”
CoxSBN recently spoke with Embree. Here’s what she said:
What is the most common mistake small business owners make when leasing property?
They fail to realize that essentially all terms of the lease are negotiable.
Is it a good climate for negotiating rents? Why or why not?
Absolutely, it’s a great environment for negotiating rent right now. It’s still very much a tenant’s market. It’s a great time to negotiate lower rents, lower maintenance charges, low rent escalators and tenant improvements.
How can they broach the subject with their landlords?
Read your lease very carefully, and consider that anything can be negotiated. Generally, people focus on terms like rent and the term length, but there are other aspects and provisions that can be negotiated, such as the rent escalators. Typically, the industry standard is a 3 percent escalator, but I recently negotiated a lease with a 2 percent rent escalator. And I’ve also seen rent escalators that are tied to CPI (Consumer Price Index).
Maintenance charges are something you can make as a percentage of rent, or it can also be a flat rate. That’s something a tenant can consider up front and negotiate for. And in today’s tenant’s market, it’s not uncommon to negotiate a lease where the tenant does not have to contribute to any maintenance charges, at least for the first few years.
What are the benefits of being a small business looking for commercial space, versus a larger company?
Small businesses are more flexible in terms of the potential spaces they have to rent. But depending on the location, some small businesses may face difficulty in leasing certain spaces if they’re only going to take up a smaller portion of the prime space, rather than several floors. But it really depends on the building and also the area in which the building is located.