Real Estate Leases Part I: The Hunt

Whether you love real estate or not, the hunt to find the “right” space is critical.  

While most have heard the “Location, Location, Location” refrain, the hunt itself obviously depends on many other factors than mere location.

One of the biggest controlling factors is what the lease itself says.

Commercial leases can range from one page, a likely inadequate document, to over 250 pages, which is usually excessive.  Remember that no outside or spoken deals matter to a court or arbitrator resolving a dispute years later. Get everything in writing.

Until you hear the results of your lease review, a task that usually takes 3-5 hours for a lawyer to complete depending on the length, plus another hour or so to discuss it with a client, you won’t know what potentially disadvantageous terms exist in the lease that would make you not want to sign it. And believe me, there will always be “bad” terms.

Therefore, it is recommended that while a lawyer reviews the lease for your “dream space,” you should keep hunting for another space.

Two Key Reasons to Keep Hunting:

(1)  You have not let a week or more go by without seeing more properties if the landlord refuses to negotiate any changes (or the changes you really want).

(2) Leverage. To be in the best bargaining position, you have “play hard to get.” If the landlord perceives that you are too interested or too desperate, the landlord will not negotiate as much and you will lose out. Continuing to visit other properties increases your leverage by making you able to walk away.

Consider Using a Quality Commercial Broker.

Working with a commercial broker to manage your hunt, is also recommended. Many potential tenants I meet do not realize that the landlord will pay your commercial broker’s fees, making this a free service for you as a business owner. I or any other experienced lawyer can easily connect you to a quality broker whom we know will serve your interests.

A commercial broker also makes it easier to keep looking after you have one lease in for review and of course helps find properties that suit your needs likely better than you could on your own.

While insisting to tour other properties increases the broker’s workload, it will lead to you and your business finding the best property for you and any experienced broker will understand this.

Take Away Points:  Have a lawyer experienced with commercial leases review your potential lease. Frequently, landlords will negotiate many provisions, but in case yours won’t, remember to keep hunting for another space that will suit your needs. If you are unfamiliar with commercial real estate, enlist a commercial real estate broker to represent you – they are free to tenants. But know that a broker cannot legally rewrite your lease –only a lawyer can.

Laura Liss represents general business and franchise clients alike in business, employment, and real estate transactions at her own firm, the Law Office of Laura Liss, P.C. (www.lauraliss.com). When out of the office, she enjoys networking, Mexican food, and hiking in the foothills. She can be reached at laura@lauraliss.com, on Twitter @LauraLissLaw, or on Facebook at facebook.com/attorney-laura-liss.