How Can I Avoid Costly Mistakes In A Commercial Lease?

Business owners are usually not aware of how easy it is to make costly mistakes in a commercial lease. At Jurado & Farshchian, P.L., we get more calls from clients who need help fixing a problem with a commercial lease than we do from clients looking to learn how to prevent problems from happening.

As commercial real estate attorneys, we find that many of our clients are too quick to accept the landlord’s “standard form” commercial lease because they do not understand the terms outlined in the contract or the most advantageous way to proceed with commercial lease negotiations. 

Here is a list of things you need to consider as a prospective tenant to avoid making costly mistakes in a commercial lease negotiation:

• You must take your time.

Prospective tenants generally underestimate how long it will take to find the right location and negotiate a commercial lease on it. As a prospective tenant, you need to take your time to find and research the right area for your business. Taking your time at this stage allows you to become more familiar with the market, which provides more opportunities for finding great locations. If you take your time to expand your possibilities, your negotiating leverage will grow as well because you could have several landlords vying for your business. You are unlikely to obtain a favorable commercial lease if you do not allow enough time and opportunity to create competition between your prospective landlords.

• You must work with the right broker. 

Inexperienced business owners usually underestimate the importance of working with a real estate broker and criticize brokers in general. It is easy to criticize brokers because they typically work for a commission and are often viewed as representing the transaction rather than their clients. Although this criticism may sometimes be fair, a good broker can be an invaluable part of your commercial lease. An excellent real estate broker will work to understand your business’ needs and will help you focus on both your current and future real estate goals.

• The letter of intent or term sheet is crucial.

Although a letter of intent is an unenforceable expression of purpose, it is a useful tool in negotiating a favorable commercial lease. When it comes to term sheets, it is important to set parameters during negotiations. If you need expansion or renewal options, you must make sure your prospective landlord addresses your concerns in the term sheet. Although term sheets are not binding and landlords can choose to retract an offer, they can be a useful negotiation tool. Landlords know that earning a reputation for withdrawing or renegotiating term sheets is not good for their businesses.

• Negotiating a commercial lease takes time.

Many prospective tenants make the mistake of thinking the deal is final once the parties agree on the term sheet. This assumption is generally not the case. Although a term sheet can certainly streamline the process, it cannot address all of the issues that usually arise under a commercial lease. The lack of specificity in a term sheet can result in ambiguities that you must resolve during the negotiation phase of your commercial lease, which takes time and patience. 

Mistakes in a Commercial Lease – How a Lawyer Can Help You Avoid Them

For small business owners, the process of entering into a commercial lease agreement can be a bit intimidating – not to mention dreadfully dull – and there are several pitfalls associated with it. We often encounter commercial leases that are inexplicably restrictive and narrow when it comes to what tenants can do with their new space. As a prospective tenant, you must work with a Commercial Real Estate Lawyer that can help you avoid costly mistakes. 

At Jurado & Farshchian, P.L., we will be by your side every step of the way – from finding the right location to negotiating the lease and closing the deal – to ensure you get a favorable deal under the commercial lease agreement. We have the best real estate lawyers in Florida, and we are one phone call away.

Call us today at (305) 921-0440 or send us an email to Romy@jflawfirm.com to schedule an initial consultation.