Negotiating and Signing an Office Lease

19
Sep

Negotiating and Signing an Office Lease

Now we come to the final step in leasing an office: negotiating and signing a lease.

I used to be surprised at how casually even smart business men regard their lease. Many never bother to read it. Some can't even find it. 

This nonchalance is often the cause of future office occupation misery.

It's all too common, even among otherwise clever business people.

Don't be lease ignorant. 

Here are a few things to get you in the know and to avoid future surprises.

A Contract

A lease is a business document, pure and simple. 

Every transaction in life goes smoother when both parties agree on the terms in advance. That's what your lease intends to do.

This contract will describe your occupancy costs. If an expense is in the lease and there is a disagreement about whether you are liable and the dispute winds up in court, you will pay if the expense is spelled out in the lease. You won't pay if it's not.

Where You Stand

Tenants begin with a clear disadvantage. Your new landlord is doing her everyday job when she presents you with a lease. You, on the other hand, are performing a function that you might have never done or probably have not done in five years.

Your landlord is not likely to put her best offer on the table.

Would you?

It's the Market Stupid

If you are operating in a tenant's market, meaning that there is lots of office space for lease and tenants are in high demand, then you are likely to be able to negotiate a lot of goodies.

Among these are getting your new landlord to pay your moving expenses, buying out your old lease, giving your many months of free rent and giving you huge building allowances.

It's only reasonable to have a real estate professional on your side who is in touch with the market and what concessions to ask for.

If office space is tight, it's a landlord's market and few if any concessions will be available.

Again, only a full time real estate professional will be able to assess the landlord's advantage and let you know where you stand.

Most of the time the market for office space lies in between advantage-tenant and advantage-landlord.

Occupancy Costs

Never as simple as just paying the rent, occupancy costs can later become a nasty surprise to tenants.

Your lease should spell out what these costs are along with when you are expected to pay them. Beside rent, these might include common area maintenance (CAM), janitorial services for your space, taxes and insurance and others. There are no end to landlord expenses and his job is to pass on as many as possible to keep her business profitable. 

But they need to be in the lease.

And you need to understand them before you sign the lease.

Maintenance Responsibilities

In some buildings the air conditioning equipment is within the tenant's space and the lease specifies that the tenant is responsible for maintaining it. You also might be required to do your own wiring by hiring a licensed electrician. 

Read the lease carefully to discover exactly what your responsibilities are in maintaining the property and get an idea of what it's going to cost you.

Options

There are all kinds of options that you might want in your lease. The most common is the option to renew at a certain rent at the expiration of the lease.

There are also options to downsize, to upsize, to get other space in the building when it becomes available. The landlord may have no problem offering some options and requiring a rent premium for others. 

What About My Lawyer?

Consider what your lawyer is in a position to know? 

Unless he has his ear to the ground listening for current changes in the office market, he's unlikely to be able to judge the lease's market-based benefits. Is the rent high or low? Are the expenses out of line? Are the options a good deal or not.

What your lawyer can do is tell how well the agreement is drafted to assure that your interests will stand up in court.

In my experience a good lawyer will sit down with his client, the tenant, and ask objective questions that he can generate from the lease itself.

Did you agree to pay $xx.xx per sq foot in rent?

Did you agree to an x% raise each year on January 1?

Did you agree to pay $xx.xx per foot each year?

Did you agree to pay an x% increase in expenses each year beginning January 1?

Did you agree to keep the air conditioner in good working order and have it inspected once each year?

And so forth.

You should be able to answer his questions affirmatively.

"Yes. I agreed to that."

If you can't answer in the affirmative, then that is the time to do something about it.

Read The Lease

What a dreary task! But not reading it can make things a lot drearier.

And for the sake of all that is holy, have a copy of the lease that you can lay your hands on.

 

Client Testimonials

My company is new and growing fast. We need more space. I thought it would be easy. Look at LoopNet, check out a few locations and sign up.

I wish.

LoopNet is full of jargon and misdirection. You find listings that are no longer available. ("Oh, we just leased that. But I have another space just like it that I can show you.") Bait and switch BS.

After following leads around in circles, I was super frustrated with the process and getting closer to a space crises at the same time. I clicked Peter's site in Google. I really wish I'd done that in the beginning.

Honestly, I have been in business for my entire adult, but I'd never heard of a tenant rep, someone who specializes in helping commercial tenants like me find and lease space. It is an incredibly valuable service. Just knowing about it is worth a semester in business school.

Peter showed some great properties. He listened, came to understand my company and showed space that was relevant and possible. Each new space inspired me to look more. I got new ideas.

Finally when we decided on a great location in downtown St. Pete. I liked everything about it. But finding the right space was just the beginning.

My company is in the medical field and has many special requirements: unique electrical hookups, plumbing for oxigen tanks, and a one-of-a-kind floor plan.

I admit I was daunted by the lease and all the requirements of my company. But Peter stepped up and negotiated a great deal with my new landlord which included a generous build-out allowance.

There are not enough adjectives to describe how much Peter has done for my company. If you are looking to lease commercial space, do yourself a favor and call Peter. You will be real happy that you did.

Unbelievably, I paid nothing for his service. My new landlord took care of that.

Fred Palmer, CEO
Stemedix

From first meeting Peter, and throughout the office suite search process to the negotiations and execution of my office lease, Peter provided excellent communication and professional service. He took the time to really understand my office space needs and was very resourceful in providing timely, valuable information and sage advice. He helped make the whole process a pleasant and friendly one.

I appreciate everything Peter did for me and I highly recommend him to anyone searching for commercial real estate consultations and services.

Jerry Albrecht
Attorney at Law

We have known and done business with Peter for some 15 years and he has acted for our group of companies in several office, commercial and industrial leases.

He is a seasoned professional, great to work with, always on on top of whats going on in the market and acting not only as a broker but ongoing advisor.

He is a great negotiator and I always feel like we got the best deal possible when we close.

Finally he is a nice guy and like ourselves I'm sure has developed hundreds of other great relationships and friendships in the business.

Carl Dilley
President
Island Capital Management, LLC.

I have known Peter Fischbach for approximately 20 years both as a friend and professionally.

I have found his knowledge of Real Estate, marketing and business sense extraordinary.

He has a great knowledge of Architecture and recycling of old buildings for new uses.

I would recommend him for any professional Real Estate consultations and related services.

Peter Goldhammer, Architect
Florida #0006567

I have known and worked with Peter for many years, and would not hesitate to recommend him for any real estate service.

Peter is very knowledgeable in all aspects of commercial real estate, but is particularly adept at negotiating leases and contracts.

Linwood Gilbert, MAI
President at Urban Realty Solutions

If you are looking to lease a commercial or business space Peter Fischbach is your man. We've worked with him for years and could not be more pleased. 

He is friendly, extremely well-versed in all of the services he offers, and has an unparalleled understanding of real estate in general and the idiosyncrasies of the local Tampa Bay market. 

The landlord might not be happy with the rent, amenities, and contract terms he will negotiate for you, but you and your company will.

Jake Braun
Marco Polo
Lead Developer
CIO