Long-Term, but with Options – Flexible Lease Provisions – Effective Realty Advisors

Long-Term, but with Options – Flexible Lease Provisions

By Michael Staskiewicz | EXECUTE

It’s hard not to see why most landlords prefer to lock commercial tenants into a long-term lease.

Acquiring new tenants is expensive, and every unoccupied month leads to lost profits. The problem for business owners is that it’s hard to know how long a commercial space will suit your company.

Business needs can change dramatically over three years, and a lot more over 15, so you need to make sure your long-term lease has certain provisions that will allow you flexibility during the duration of your contract.

Renewals and Extensions:

A renewal provision will allow you first right to extend your lease if you want to stay in your current space. It’s a guarantee you won’t lose an office you want to keep.

Subleases:

If you outgrow your space, a sublease will allow you to rent it out to another business. With a sublease, you don’t need to worry about paying for two offices at once.

Termination:

A termination clause will allow you the option to end a lease early at certain points during your contract. It is standard practice for these clauses to include a fee, but it’s a lot better than being stuck somewhere you don’t want to be.

Contraction and Expansion:

Contraction and expansion clauses offer you the chance to reduce or increase your space, respectively. Contraction is usually offered at select times. With expansion, the terms might be the same, or they may offer you any space that becomes available before listing it to the market.

Exclusivity:

Similar to a non-compete clause in employee contracts, exclusivity means that no competitor will end up in the same building as you. The contract should clearly define who you consider to be a competitor.

Keep in mind; these provisions may lead to an increase in rent. Be prepared to negotiate, and have an idea of what matters most to you.

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About the Author

Michael Staskiewicz, CCIM, Managing Principal of Effective Realty Advisors and a team of strategic partners, help financial decision makers of mid-size companies perfectly align their real estate with their business needs, so that they increase profits and improve operational and financial performance.