Avoid these pitfalls when leasing commercial space

By Jonathan Schmidt / Guest Column

For many new business owners, finding the right place to do business is one of the most pressing issues on the docket. It’s all about location, location, location, right?

That’s definitely important, but I would suggest taking steps to ensure the leasing process proceeds in your best interests — or at very least that you are going in with eyes open — is even more vital.

Commercial real estate agents can be a huge help in locating the right space for your new business. If you don’t already have a location in mind, try to understand what your agent brings to the table in terms of business acumen. Will they be able to provide valuable insight into the market? Have they dealt with locating spaces for businesses similar to yours? You, as the business owner, will have to decide how much insight you want from them versus doing your own research on those subjects.

A good question to ask a prospective agent is whether the properties they are showing you are only listings they have as the landlord’s agent. A good agent will show you a range of available properties, regardless of which agent represents the landlord.

If the agent does represent the landlord for a particular property, that limits the agent’s ability to go to bat and negotiate on your behalf. It becomes a “dual agency” relationship, where the agent represents both you and the landlord. In this case, the agent is only able to pass along your terms for the negotiation with the landlord. You must do your own negotiating. The agent can give you advice but cannot pit one party against the other.

Even when you think you have found the right property for your business, that is just the beginning. It is important to research and understand the owner of the property. If there is a management company running the building (and negotiating on the owner’s behalf), it would be equally important to research that company.

Why is that important? Because you should always know who you are doing business with. You should not enter into commercial lease with the mindset that the lease is just a one-time transaction. Leasing property for your business is an ongoing relationship. There will be issues to deal with during the duration of the lease, such as build-out, renovations, repairs, maintenance and even negotiation of a renewal of the lease agreement toward the end of its term. Just as in any other line of business, there are reputable and less-than-reputable landlords. If you choose to lease space from someone who isknown for having a reputation (good or bad), it will be a key predictor of how your relationship may fare in the future.

This is not to say that you should base your decision solely on the reputation of the landlord. Rather, it is simply one factor that you must consider. For example, you may choose to alter your approach to negotiations, or you may try to alter the wording of the proposed lease to cover areas you perceive as an additional risk.

Having this knowledge allows you to make a more informed decision. Do you choose a great location with a landlord who is known to be difficult to work with? Or, do you choose a less-desirable location with a landlord who is known to be wonderful to work with? Either way, you will go in with your eyes open.

Once it comes time to negotiate the specific terms of the lease, follow the same principles of any contract. Keep in mind that the goal of the contract is to come up with a document that anyone can read and understand. It is a form of communication where each party should understand what they are giving up and what they are receiving in return. An experienced attorney can talk with you about your specific needs and make sure that the lease is clearly written.

Jonathan Schmidt is an attorney and partner with Nazette, Marner, Nathanson & Shea LLP. He practices in areas of business and litigation. He can be contacted at jschmidt@nazettelaw.com or www.jschmidtlaw.com.