Republished with permission from our good friends at REOptimizer
By Don Catalano
Even if you have thought carefully about your company’s strategic plan and feel confident about short and long-term forecasts, it’s impossible to completely predict the future of any business. Because you can never be certain of what tomorrow holds, you don’t want to find yourself stuck in a strict commercial lease that may no longer meet your needs before the end of its term. These tips will help you create a flexible agreement to future proof your lease.
1. Go for Short Term
Landlords prefer long-term leases for the security they provide, but for companies, short-term leases are often more ideal. You’ll need to strike the right balance between choosing a term that will give you some flexibility while satisfying the landlord, so that you can get your must-have concessions in the lease.
2. Retain the Right to Sublet and Assign
Subletting and assigning are two ways that your company can avoid having unused office space if your needs change before your lease is up. With subletting, a tenant moves into all or part of your space, covering the rent while you continue to hold the lease. Assignments allow you to turn the lease over to a new tenant and walk away completely.
3. Secure the Right to Terminate Early
With a long-term lease, an early termination clause can give you an exit as needed. These clauses allow you to end a lease early, usually in exchange for a fee. In some cases, the early termination must occur at a set point in the lease, or it may be triggered by a specific event. An example would be a retail lease that allows tenants to terminate if an anchor tenant leaves the mall or shopping center.
4. Set a Time to Renegotiate
Many landlords will allow tenants to renegotiate a lease upon request, but having a renegotiation clause added to your lease ensures that you will be able to return to the table to change your lease as needed. Often, these clauses require you to exercise your right to renegotiate at a set point in the lease.
5. Add Expansion and Contraction Clauses
If you’re concerned that you may require more or less office space in the future, expansion and contraction clauses can provide the flexibility you need. With an expansion clause, you have the right to move into office space that becomes available in the building. Contraction clauses give you the freedom to surrender part of your occupied space.
6. Make Sure You Have the Right to Renew
To ensure that your options remain open at the end of your lease, make sure that the agreement gives you renewal and extension options. Pay attention to what steps you need to take to notify your landlord of your intent to renew or extend the lease.
7. Use a Tenant Rep Broker
Tenant representative brokers give tenants an advantage at the negotiating table. Having one act as your advocate can increase your chances of arguing for all of the above commercial lease clauses to ensure flexibility.