Leasing premises?

Avoid these 9 mistakes when leasing premises

Leasing premises
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Leasing Premises?

When it comes to leasing premises for your business, the lease negotiation process can be overwhelming and intimidating.

Mistakes made during this process can have serious impacts on your business down the line.

Your lease is likely to be the biggest fixed cost in your business and the second biggest cost behind staff costs.  Make a mistake and you can leave plenty of money on the negotiating table.

Here, we outline the top nine mistakes tenants make when negotiating and leasing premises, and discuss the potential impacts they can have on their business.

1. Failing to do proper research

You must research both the property and the landlord.

Before entering into any lease agreement, it is important to research the market and the specific property to ensure that it is the right fit for your business. You should also research the landlord to ensure that they have a good reputation and a history of treating their tenants fairly.

The impact of failing to do proper research can be significant. You could end up with a property that is not suitable for your business or a landlord who is difficult to work with. Either way, this will lead to wasted time and money, as well as potential legal issues down the line.

2. Failing to understand the lease terms

Reading a lease agreement isn’t enough. You have to understand every aspect. Every sentence, every point, every word. This includes the rent, lease length, renewal options, maintenance responsibilities, and any fees or penalties that may be incurred.

Failing to understand the lease terms can result in unexpected expenses or obligations, which can be detrimental to your business. It can also lead to disputes with the landlord, which can be costly and time-consuming to resolve.

3. Not negotiating the lease terms

“Written on paper today” does not mean “cast in stone for eternity”. It is important to remember that any lease agreement is negotiable, and you should work to negotiate the terms that are most beneficial to your business.

Reacting to pressure to sign (“This offer won’t last”, “These are the best terms I can offer”, “I might not find a better deal” etc.) without identifying and dealing to unfavourable terms will impact your business in the long run. This can include high rent, restrictive lease terms, or limited flexibility in terms of the use of the space.

4. Failing to anticipate future needs

When negotiating a lease, it is important to consider the long-term needs of your business, including growth and expansion.

Failing to anticipate future needs can result in a space that is too small for your business, or a space that is too large and leads to wasted resources. It can also result in a lease agreement that does not provide the flexibility your business needs to adapt to changing market conditions.

5. Failing to get professional help

Would you take someone to court without getting advice from a lawyer? Or face an audit without talking to your accountant? Many tenants make the mistake of not seeking professional help when negotiating a lease – when there are many thousands of dollars (and sometimes a business’s future) at stake. It is important to work with a Property Advisor who is experienced in commercial lease negotiation to ensure that your interests are protected.

If you are not negotiating leases week in and week out, then you are not on a level playing field. The negotiating table is tilted against you.

Failing to get professional help can result in a lease agreement that leaves too much money on the table, or, does not adequately protect your interests.

It can also result in issues down the line, which can be costly and time-consuming to resolve.

6. Not understanding the property’s zoning / body corporate rules / restrictions

Another common mistake tenants make is not understanding the property’s zoning, body corporate rules or centre / building restrictions.

It is important to ensure that the property is zoned for your business  and that there are no body corporate rules, or  centre / building restrictions that may impact how you can operate from the premises. And, of course, you need to do this before signing a lease agreement.

Failing to understand the property’s zoning, body corporate rules, or restrictions can result in leased premises that are as much use to your business as a chocolate teapot.

7. Failing to negotiate lease renewal terms

Failing to negotiate lease renewal terms can result in a lease agreement that does not provide the flexibility your business needs. It is important to negotiate renewal options when signing the initial lease agreement to ensure that you have the flexibility to stay in the space if needed. Failure to do so can result in a situation where you are forced to vacate the property at the end of the lease, which can disrupt your business operations and cause significant financial losses.

8. Not considering the cost of improvements

Depending on the space you are renting, there may be necessary improvements or fitout that need to be made to accommodate your business. It is important to factor in these costs when negotiating the lease agreement.

Failing to consider the cost of improvements or fitout will result in unexpected expenses that directly impact your bottom line. And good luck trying to find a landlord who’ll pay for improvements after you’ve signed a lease…

9. Failing to maintain good communication with the landlord

Finally, it’s important to establish a good working relationship with the landlord to ensure that any issues or concerns can be addressed in a timely manner.

Failing to maintain good communication with the landlord can start a downward spiral in the relationship, where small issues and disputes become amplified and unresolvable. And if you’re at odds with your landlord, it’s your business that ends up suffering and paying the cost.

In conclusion, negotiating and leasing premises is a complex and important process that will have a significant impact on your business.

It is important to avoid all nine of the common mistakes, and ensure you sign a lease agreement that is beneficial to your business and protects your interests.

So… you need to do your research, fully understand all lease terms, negotiate those terms, anticipate your future needs, become conversant with the property’s zoning, rules and restrictions, negotiate the lease renewal terms, consider the cost of all improvements, and make sure you maintain good regular communication with the landlord.

Or, you can use the services of a professional Property Advisor.

Either way, you’ll ensure your business thrives in it’s new space!

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Marcus Bosch

Managing Director