Are you preparing to take a major step in growing your business by signing your first commercial lease? Arizona has a fast-growing entrepreneur community of new business owners, many of whom are signing their first AZ commercial lease. Several testimonies from small business owners have revealed that optimal professional relationships were maintained with their lessors by negotiating transparent, clear-cut, and mutually-beneficial tenant contracts.
Given the relative complexity and nuance native to the commercial real estate industry, it can be somewhat of a trial unless you, or someone in your business, have intimate knowledge of the field, or happen to be a real estate professional. In most cases, the crucial component of successful contract negotiation involves asking your lessor and yourself a few simple and straightforward questions:
1. Can my business’s budget and infrastructure accommodate the space for the duration of the lease period?
Be conscientious of your business’s financial circumstances, growth projections, and goals. Once you move in, commercial space becomes an integral part of your business. It shapes your company’s cost structure, becomes the hub for its key activities, and likely constitutes and houses one or more of your business’s key resources.
2. Will my business or the lessor be responsible for paying tax levies or surcharges on the property?
Some contracts may require you cover charges imposed on the lessor by outside institutions. For example, if you are not willing to pay a portion of the lessor’s state-imposed property tax as a renter, it is your responsibility to make sure your contract does not require you to foot the bill.
3. Are there any service or space fees that my business will be responsible for paying?
In some real estate contracts, the lessor may charge the tenant for space or services the tenant has no intention of using. In addition, some AZ commercial lease arrangements may ask the tenant to pay a fee for use of common space in the facility. If these are spaces you do not reasonably foresee utilizing, it may be wise to ask for an exemption to that charge. Finally, always know how employee parking and utilities costs will be handled before moving forward with any lease agreement.
4. Is the lessor in a solid financial position?
An unstable lessor in a compromised financial position is a heavy risk that may become a bigger pain to your business than the lessor’s space is an asset. A landlord in need of capital to keep his/her practice afloat is more likely to raise rent, impose hidden fees, fail to follow through on property maintenance obligations, and risk foreclosure. Look for sustainability and integrity in your landlord, and your business will find the right home base for its operations.
5. When in doubt, ask a professional real estate lawyer.
It’s always good to have a trained eye look over your deal to ensure everyone’s interests are protected under the commercial lease. Arizona is home to many real estate attorneys who can help you navigate the process.