When you have found the perfect location for your business-you've done your homework and made sure the space was the right size, the building location is suitable and you are ready to make the commitment to take on a lease-the next step is to negotiate the lease terms. Make no mistake, obtaining favorable terms can be a deal-breaker. As a good business person, you need to know when to walk away. It's not a bad idea to have a backup property in mind so you don't feel cornered during negotiations. 

Terms 
If this is your first lease, don't panic. Rely on the team you've selected to assist you and walk you through the process: your broker, attorney and accountant. The first points to consider are the most common negotiating options:

• Term of the lease has to do with locking in a price for a specific time period. Most leases for typical office space are three to five year terms with options to renew. One year leases are available, but they are harder to find and tend to be more expensive.
• Options for renewal spell out the terms of how many more years you can secure the space and at what pricing. This is helpful when you think about the cost of moving and the interruption to business that it creates.
• Negotiating time frame indicates how long each party is given to respond to an offer. 30 days is the typical time frame.
• Square footage price is usually one of the most contentious points of negotiation. Comparison shopping is crucial so that you can compare apples to apples (e.g., Class A building to Class A building). The smaller the space, the less "wiggle room" is available.
• Flooring and Painting is typically discussed if the potential tenant addresses it at negotiations. You may choose to keep the existing wall cover and flooring or have the current versions cleaned, repaired, or replaced. But remember, flooring and wall covering isn't replaced for free: it is built into the square footage rate.
• Moving walls and other build-outs are also negotiable, but for a price: your square footage rate. You may negotiate based on length of term, market conditions, and the extent of the changes.
• Free rent for a defined number of months can be helpful to a tenant who is about to incur a multitude of costs for the move. This option tends to be offered only in a buyer's market, and is often overlooked by first-time tenants.

Standard leasing terms 
Many leases have standard leasing language with terms that may be open to negotiation. Make yourself familiar with these items and the relevance of them in your marketplace:

• Most often, some kind of terms regarding lease renewal and the amount of notification needed will be included in the lease. However, if the landlord does not want to commit to a particular square footage rate, such as in smaller properties in "hot" markets where leasing rates may increase dramatically to the landlord's advantage, a renewal offer may not be included. 
• The landlord may show your space to other clients while you are occupying the space, especially if you are on the fence about renewing the lease. Typically, there no limitations on this practice. It can be disruptive to your business, so you may consider is putting in some limits, such as getting it in writing that the property can be shown only with advance notice.
• Allowing you to subleasing the space is usually a landlord's last resort to gain income due. A landlord would typically rather have a new tenant, at current rates, renting the space. However, they may agree to some flexibility on this point, and it is in your best interest to make that part of the lease.

Almost Non-Negotiable 
The following items are nearly set in stone in most marketplaces; however attempting to negotiate is always worth a try. The worst they can say is no. Keep in mind that many negotiations are based on the square footage being leased and the tempo of the marketplace.

• Insurance coverage is needed for the property, and the lease will have specific coverage requirements. Even if you are a long-term business and have a zero claim record, it will be difficult to negotiate anything less. Often the building is financed by a bank, and the insurance is part of their collateral package requirements. 
• Relocation to another space within the building is usually part of the lease agreement for the benefit of the landlord. This occurs in case a much larger tenant wants to take on a floor or wing of the building and your suite is right in the middle of that space.
• A security deposit is typically the amount of the first month's rent. It's used to pay for any potential damage to the property. 
• Landlord indemnification makes your company liable for the actions within the building, not the management company.
• Breaking the lease is done if you are moving to another property managed by the same company. Financial issues are not considered lease-breakers.

Financial Impact and Financial Risk 
The financial concerns of a lease are critical to the livelihood of a company. Before entering into any lease, it's essential to be fully aware of all ramifications the company and its principal will be exposed to, both legally and financially. 

When you sign a lease, who signs it and what does it mean? The management company will require a principal(s) of the company to sign the lease, and the signature will be considered a personal guarantee of the lease for the company, or the signature will give notice of the principal(s) of the company's legal authority to sign for that entity. What's the difference?

• Personal guarantee of a lease is a matter to consider greatly. Simply put, a personal guarantee is the principal(s) of the company signing a lease on behalf of the company, thus assuring that they will make the payments for the company if the finances of the company don't permit. This means a personal financial commitment for the length of time of the lease. 
• Corporation indebtedness is where the company as a separate entity signs the lease, thus promising to pay (this is one of the reasons to incorporate). Thus, if the company should become financially insolvent, the lease and the payments due fall in line with all other debts of the company. This option poses the least risk to the principal(s). It may be a challenge to secure for a new business, but it is worth pursuing.

Financial Costs 
The terms of a lease have dollar amounts associated with them, and therefore need to be considered hard costs in the budget, as described in the following list. Note that all of these terms may not be in your specific lease based on the type of property you secured.

• Personal property taxes are the taxes due to the local city authority for property owned by the business. Personal property typically means equipment, furnishings and computers. This tax is based on state regulations and is not applicable in all states and countries.
• The portion of real estate occupied by the company will be billed by the management company as a prorated share of the total property tax based on square footage use to the company. This tax is based on state regulations and is not applicable in all states and countries.
• Utility costs are based on the company's square footage as a percentage of the entire building, or they may be accessed separately from the utility company themselves.
• Common area maintenance is usually made part of leases involving retail space, as a bill assessed on the square footage use of the property. The payment is used to maintain the common areas of the building such as landscaping, public restrooms and so on.
• Repairs are typically part of retail commercial space. This expense is a direct result of repairs being made to the specific space being leased. In most cases, roofs will not be included because they are shared items, but you will need to check your specific lease for details.
• If appraisals are needed for insuring your personal property, the insurance company will require you, at your own expense, to provide them. It is very important to keep up-to-date with appraisals, especially for equipment.

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