Lease Process

Obtaining a lease, particularly for commercial real estate, follows a structured process. Here’s a step-by-step guide to help you through it:

1. Determine Your Needs

Business Requirements: Identify the type of space (office, retail, industrial), size, and location your business requires.
Budget: Set a budget for rent and related expenses, such as utilities, property taxes, and common area maintenance (CAM) fees.
Amenities: Consider necessary features like parking, accessibility, or storage.

2. Search for Suitable Properties

Online Listings: Use commercial real estate platforms like LoopNet, Crexi, and CoStar.
Broker Assistance: Partner with a commercial real estate broker who understands the local market and can help find options that meet your criteria.
Property Tours: Visit potential spaces to assess layout, condition, and suitability for your operations.

3. Submit a Letter of Intent (LOI)

Outline Key Terms: The LOI is a non-binding document that outlines the key lease terms, such as rent, lease term, tenant improvements, and options for renewal.
Initiate Negotiation: Once submitted, it signals your interest and starts the formal negotiation process with the landlord.

4. Negotiate the Lease Terms

Rent: Discuss the base rent and any additional charges (e.g., CAM fees, taxes, insurance).
Lease Term: Agree on the duration of the lease (e.g., 3, 5, or 10 years).
Escalation Clauses: Negotiate any rent increases over time (e.g., annual percentage increases).
Tenant Improvements (TI): Clarify who pays for build-outs or renovations required to make the space functional for your business.
Security Deposit: Discuss the amount of the deposit and terms for its return.
Exit Clauses: Understand options like subleasing, early termination, or renewal rights.
Other Provisions: Consider details like exclusive use (for retail spaces), signage, parking allocations, and maintenance responsibilities.

5. Hire a Commercial Real Estate Attorney

Legal Review: Have a commercial real estate attorney review the lease to ensure it protects your interests and complies with local laws.
Clarifications and Changes: Address any unclear terms or unfavorable clauses with the landlord before finalizing.

6. Sign the Lease

Finalize Negotiations: Once both parties agree to all terms, sign the lease agreement.
Financial Commitments: Pay any upfront fees such as the security deposit and the first month’s rent.

7. Obtain Permits and Insurance

Permits: Depending on the type of business, you may need zoning, building, or health permits before moving in.
Insurance: Obtain required insurance coverage, such as liability, property, and worker’s compensation insurance.

8. Prepare the Space

Tenant Improvements: Complete any build-outs or renovations agreed upon.
Utilities and Services: Set up necessary utilities (electricity, water, internet) and make the space operational for your business.

9. Move In

Space Setup: Move in your equipment, furniture, and staff to prepare for opening.
Compliance: Ensure that your space is compliant with local regulations and codes before starting operations.

By following these steps, you can secure the right space for your business while protecting yourself legally and financially throughout the leasing process.

Lease Questions

When entering a lease with a property owner, it’s crucial to ask the right questions to protect your interests and ensure clarity in the agreement. Here's a list of important questions to consider:

1. Lease Terms

What is the length of the lease? Is there an option to renew, and under what terms?
What is the process for lease renewal or extension?
Can the lease be terminated early? If so, what are the penalties or conditions for early termination?

2. Rent and Payments

What is the base rent, and are there any additional fees (e.g., CAM charges, utilities)?
How and when should rent be paid? Are there any penalties for late payments?
Is there a rent escalation clause? If so, how much will the rent increase each year or upon renewal?

3. Maintenance and Repairs

Who is responsible for repairs and maintenance? Clarify what the landlord covers and what the tenant is responsible for.
Is there a maintenance reserve or budget? How are common area maintenance (CAM) charges calculated?
What are the procedures for reporting maintenance issues?

4. Alterations and Improvements

Can the tenant make alterations to the space? If so, do improvements need to be approved by the landlord?
Who pays for tenant improvements? Can the landlord offer a tenant improvement allowance?

5. Utilities and Operating Expenses

Are utilities included in the rent? If not, how are they billed?
What are the average utility costs?
What operating expenses are the tenant responsible for? Are there any shared costs with other tenants?

6. Insurance and Liability

What insurance is required by the tenant and landlord? Is tenant insurance for liability and property damage mandatory?
Who is responsible for damage to the building or property?

7. Signage and Branding

Can the tenant install signage on the property? Are there restrictions on the type, size, or location of signage?
Are there fees for installing or maintaining signage?

8. Subleasing or Assignment

Is subleasing allowed? What are the conditions or restrictions for assigning the lease to another party?
What are the fees for subleasing or transferring the lease?

9. Use of the Property

Are there any restrictions on the use of the property? Can the tenant operate their business as planned?
Are there any zoning or permit requirements that the tenant must meet?

10. Default and Remedies

What happens if the tenant defaults on the lease? What is the process, and what remedies does the landlord have?
Are there grace periods for missed rent payments before penalties or eviction?

11. Landlord Responsibilities

What are the landlord’s obligations? What services or facilities do they provide (e.g., security, cleaning, landscaping)?
Who manages the property? Is there an on-site property manager or a third-party management company?

12. Parking and Access

What parking is included with the lease? Is it reserved or first-come, first-served?
Are there any restrictions on access (e.g., building hours, keycard entry)?

13. Environmental and Compliance Issues

Has the property been inspected for any environmental hazards (e.g., asbestos, lead)?
Is the building compliant with accessibility laws (ADA compliance)?

14. Dispute Resolution

How are disputes between the landlord and tenant handled? Is there an arbitration or mediation clause?
Can the lease be amended? If so, what is the process?

15. Personal Guarantees and Security Deposit

Is a personal guarantee required? If so, what are the terms?
What is the security deposit amount? When and how is it returned?

These questions will help you understand the lease terms and obligations, minimize risks, and ensure a smooth relationship with the property owner.