Leases and Rental Agreements: An Overview
A lease is a contract between you and the landlord. A
lease can be for a short term (as little as one month) or long term,
and it can be written or oral - although a lease for more than a
year must be in writing to be legally enforceable. Some people use
the phrase "rental agreement" to describe a short or oral lease for
which rent is typically paid once a month and the tenancy can be
terminated on a 30-day written notice. To avoid confusion, I'll
stick to the word "lease".
Terminology Tip: Sometimes a written lease talks about the
'Lessor" and the "Lessee". The lessor is the landlord; the lessee is
the tenant. If you have a choice in terminology, go with the plain
English "landlord" and "tenant"; you'll reduce the risk of typos!
In theory, all terms of a lease are negotiable. Just how far you
can negotiate, however, depends on economic conditions. If desirable
properties are close to full occupancy in your city, landlords may
not be willing to negotiate with you over price or other major lease
terms. On the other hand, in many parts of the country where
commercial space has been over-built, landlords are eager to bargain
with small businesses to fill empty units. Even in a tight market
you may come across some acceptable space that, for one reason or
another, the landlord is anxious to fill, giving you greater
bargaining power. This is often true where there's a new building or
one under construction and the landlord needs cash. Also, if you're
one of the first tenants in the building, you may get an especially
attractive deal, because your presence may help the landlord attract
other tenants.
If you find a landlord willing to negotiate, what should you ask
for? After you read this information, you'll have a good
understanding of the kinds of terms that usually go into a lease.
Since you're not likely to get everything you want, it's important
to get your priorities straight in your own mind and concentrate on
achieving what's most important. What do you really care about? What
would be nice to have but not essential? What benefits can you offer
the landlord for things you really need?
A lower rent is likely to be high on everybody's bargaining list.
But how about physical changes in the building? Would you want the
landlord to redesign the entryway? Add some office space at the back
of the warehouse? Customize the interior for your needs? More or
better parking for your customers might be worth more than slightly
lowered rent. Your priorities may be unique to your business, so
think them through carefully before making proposals and
counter-proposals to the landlord.
Let's look at how you might approach the matter of rent. A
landlord who is reluctant to lower the basic rent may be willing
make other adjustments which may be even more valuable. The landlord
might do this so he or she can truthfully tell other prospective
tenants that you're paying a high dollar amount per square foot. (It
may sound silly, but some landlords do play this game.) For example,
in a slack market, the landlord may be willing to give you a move-in
allowance. Also, check out what the landlord is willing to do in
paying for improvements (often called build-outs) to the space.
- Partnerships
- Corporations
- Sole Proprietorships
- Incorporation Basics
- Naming your Business
- Writing a Business Plan
- Limited
Liability Companies
- Complying with Zoning Laws
- Getting
Licenses and Permits
- Why Form a Nonprofit Corporation?
-
Choosing Between a Corporation and an LLC
- Leases and Rental Agreements: An Overview
