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A cost analysis between buildings is essential for your business to properly estimate its future rental costs.
Permitted use of the premises. An office lease typically has a section that sets forth the permitted uses of the leased space. It is to your advantage to make this clause as broad as possible, because your business may diversify or you may want to sublease space to another business.
Term of the lease. Landlords are typically willing to make concessions for longer-term leases. A company’s needs may change, however, so try to negotiate a shorter-term lease with renewal options.
Rent escalations. Fixed rent over longer-term leases is relatively rare. Sometimes, landlords insist on annual increases based on the percentage increases in the Consumer Price Index (CPI). If your landlord insists on rent escalations, try to arrange that a CPI rent increase does not kick in for at least two years. Then, try to get a cap on the amount of each year’s increase. If you have to live with a rent escalation clause, consider a predetermined fixed amount. Common area maintenance, HVAC, and operating costs. Take into account operating costs that the landlord may pass on to a business. If the landlord is charging separately for these services, try to negotiate a fixed fee or cap on the amount.
Tenant improvements. New space may need some improvements or alterations. Most form leases provide that the tenant can’t make any alterations or improvements without the landlord’s consent. Businesses should ask for a clause that says they can make alterations or improvements with the landlord’s consent and that consent won’t be unreasonably withheld or delayed.
Repairs, improvements and replacements. Be aware of a clause that says that at the end of the lease premises must be returned in their original condition. Assignment and subletting. Companies should negotiate enough flexibility in the assignment and subletting clause to allow for mergers, reorganizations, and share ownership changes. Option to renew. Try to get the option to renew your rent at a fixed predetermined price, not based on a “fair market” price.
Some leases require the landlord to provide and pay for basic services, while the tenant pays a pro rata share of any cost increases the landlord incurs for such services over the initial base year of the lease.
In addition, some landlords will charge extra for services supplied other than on “business days” or “after hours.” So look at this clause carefully and try to limit charges for extra services to those that are truly extraordinary and not to be incurred on a regular basis. This can be of particular importance for a startup business, where workers often spend nights and weekends working.
































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