Five Things You Can’t Afford To Overlook Before Signing Your Lease

Jun 29, 2014

When it comes time to sign a lease on new office space, you’ve undoubtedly put considerable thought and countless hours into finding the perfect space. You have every reason to be excited about signing the lease and getting the show on the road. However, in your excitement, it’s vitally important to be certain that you really haven’t missed anything. That means you’ll need to put forth just a bit more effort in focusing on the fine print. After all, with all the time you’ve invested in your company, the last thing you need is to find some loophole that may wind up being a financial pitfall. Here’s a look at five items that warrant your attention before you sign that dotted line.

1. Tenant Improvement Allowance
I can’t say it often enough or loud enough. If you’re engaging in a build-out, make sure that it is fully priced before signing the lease. Likewise, be sure you clearly understand your tenant improvement allowance. If necessary, have a Construction Manager or contractor come and price it out for you personally. Otherwise, you run the very real risk of overages that will not be covered by your landlord, and you’ll be on the receiving end of a giant bill.

2. Base Year
As a tenant in a commercial building, you are responsible for a portion of the operating expenses of the building. Your portion of these expenses will be determined based upon your “Base Year” which is typically the first calendar year of your lease term. Since the Base Year sets the benchmark for future excess operating expenses, an inaccurate figure can wind up costing you a pretty penny. As such, it is in your best interest to push your Base Year out as far as possible. For example, if you lease office space in October of 2014, you’ll want your base year to begin in 2015 (not 2014, as the building would prefer). This will ensure that your portion of operating expenses is not based upon past expenses, including repairs, which occurred before your occupancy.

While you’re at it, make sure that your lease clearly states that you cannot be held accountable for operating expense pass throughs during your first 12 months of occupancy. Most commercial buildings are happy to provide historical estimates of operating expenses as well – so don’t be afraid to ask!

3. Early Access & Hold Over Period
Obviously, if you move into an office space on the first of the month you’re going to be charged rent from the first of the month. Yet your office won’t be functional! Don’t flush money down the toilet by moving in and paying rent without being able to work. Make certain your lease provides for Early Access, so you can begin setting up your office several weeks before you begin paying rent. Likewise, ensure that there is a holdover stipulation in your lease. That way, if you need to stay in your space for an additional month or two after the lease is up, your landlord can’t charge you an exorbitant rate for rent.

4. Expansion Clause
Having an expansion clause in your lease is just plain smart. These clauses will enable you to expand into a new space within a landlord’s portfolio, should your company outgrow its existing space. Having an expansion clause will prevent you from being locked into your space, thereby forcing you to sublease your space, or lease additional non-contiguous space. This clause can be written so that if there is no space available for expansion, then you have the right to terminate the lease. It’s a win-win!

5. Number of Parking Spaces
Make sure that your lease states clearly how many parking spaces you have the right to as a tenant. In leases it is common for the language to be stated such that you receive X number of parking spaces for X number of square feet. Say for example, you rent a 4,000 square foot office, and you are granted 2 spaces per 1,000 square feet. Unless the language is written in such a way as to clarify that you have the right to use up to 8 spaces, you may wind up paying for spaces you don’t need (particularly if employees carpool, or you’re located near mass transit hubs). Always make sure that the lease is written so that you have the right to a specified number of spaces, rather than the obligation to pay for a predetermined set of parking spaces.

There are so many other aspects to a lease outside of your base rent, and it’s important to be both protected and smart about all deal terms by hiring a tenant representative broker. All of these fine print items will be negotiated for you, without adding another thing to your already full plate. Moving should be exciting, so let yourself enjoy the process by allowing a broker to take on these challenges for you.

This post courtesy of Exis Global