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How to Negotiate the Best Terms for Your Commercial Lease Agreement in Georgia
A commercial lease agreement refers to the document that legally binds a lessor (landlord) and a lessee. It indicates that the lessee and the lessor have agreed to specific terms that have resulted in the transfer of possession rights of the commercial real estate from a lessor to a lessee. In exchange for the use of the space for commercial activities, the lessee will pay the lessor a specific amount of money in rent (and operating expenses) for a specific duration. Once signed, the document becomes a legally binding contract. Keep in mind that this document is also called a commercial real estate lease agreement or a business lease agreement.
If you just located a prime location and office space for your business, you may get tempted or act out of fear, ending up with an expensive lease that creates unfavorable conditions for your business. But, you have the power to turn things around in your favor. In this page, we outline some of the best negotiation strategies you should employ to reach fair terms. They include:
Reconsider your business needs
One of the sections of the lease covers the intended use of the business. You can only get a lease if your business activity is acceptable in the premise. However, don’t rush into signing that commercial lease agreement in Georgia because your business activity is acceptable. Reconsider the business’ current and future needs space-wise, the preferred location, and your budget. Once you’ve determined what you need to get moving, you can negotiate for better terms. A shorter lease will improve your profitability if you are uncertain about the future.
Evaluate your lease options
The cost of the commercial space will vary depending on the Georgia commercial lease agreement you sign up for.
A gross rent lease allows you to pay a single and fixed amount to the landlord. The fixed rent covers your base rent as well as the cost of future incidentals. The incidents include the property taxes, utilities, property insurance, and the common area maintenance (CAM). CAM includes payment for janitorial costs, landscaping, and grass cutting or snow removal.
Net leases, on the other hand, allow the tenant to pay their base rent and the incidental costs directly. The incidentals include the property taxes, insurance, and CAM. There are three types of net leases and the lease results in reduced rent.
Net leases vary too. In a single net lease, you pay your base rent and one incidental cost leaving the rest to the landlord. The double net lease means you pay two incidental costs (property tax and insurance) on top of the base rent. You also have the option of the triple net lease where you pay the property taxes, insurance, and CAM on top of your base rent.
Since your landlord might include other costs to your lease, you need to ask for confirmation for what you are paying for.
A modified gross lease is a lease that lets you pay the base rent and part of the incidental costs. The incidental costs are shared with the landlord.
Percentage rent lease – in this lease, you pay the base rent as well as a percentage of your gross sales. The percentage is over a specific minimum. This lease is common in malls and retail outlets.
Do you know the current market rates for leasing commercial property in the locations you are interested in? Ask an experienced commercial realtor for the current going rates on commercial properties.
After the market rent rates, check the property. Research widely. Evaluate your business’s compatibility in the building and the presence or absence of competitors. Ask about the building’s traffic and confirm whether or not there is adequate parking. A building with high traffic brought in by other tenants may help you negotiate for lower rates.
How is the security? Which are the common problems faced in the building? And are there red flags in the landlord’s reputation.
Reviewing the lease termination conditions
If you have a fixed end-date lease, you don’t have to review the terms for termination but with a fixed monthly, weekly or yearly lease or even a periodic lease, you must re-read the terms of tenancy termination. Also ensure that the late fees charged are not unreasonable, and that that you’ll have a grace period for late fees. On the other side of the spectrum, ask the landlord for their terms should the termination of tenancy arise from the sale of the building. Can you break your lease if your sales decline or when you want to move to a bigger space? Negotiate for favorable terms if the landlord wants you to pay part or the full value of the rent for the remaining duration of the lease.
Don’t forget about the leasehold improvement costs and terms, competitor clauses, and lease renewal options.
Now that you have agreed on the most favorable lease term, it’s time to seal the deal.
Whether you are looking for a business lease agreement in Atlanta, Savannah, Augusta, Athens, Macon, Marietta, Valdosta, Kennesaw or any other city in Georgia, download our free lease agreement forms online today.