Negotiating a lease can be a daunting process in any market, but it’s especially difficult in today’s challenging environment. With wildly varying lease rates, tight credit, sky high construction costs and cautious tenants and landlords, negotiating a lease can overwhelm even the most seasoned business owner.
Here’s a guide to the Top Seven Mistakes tenants commonly make during lease negotiations and how to avoid them:
# 1 – Not Researching the Market
Failing to research the current rental market is a major oversight. Without a clear understanding of average rental prices and lease terms in the area, tenants may either overpay or miss out on better options. Before negotiating, compare similar properties and familiarize yourself with local rental trends to strengthen your bargaining position.
# 2 – Ignoring Lease Terms and Conditions
Some tenants overlook critical lease terms and conditions, such as renewal clauses, personal guarantees, and maintenance responsibilities. It’s essential to read the lease agreement thoroughly and understand every detail before signing. Pay special attention to clauses related to tenant default conditions, repair obligations, and penalties for breaking the lease.
Also, remember that verbal agreements may not hold up if disputes arise. Always ensure that any negotiated terms or concessions are documented in writing and included in the lease agreement. This protects both you and the landlord and helps avoid misunderstandings in the future.
# 3 – Neglecting to Ask for Concessions
Many tenants assume that rent prices and lease terms are non-negotiable. However, landlords may be open to offering concessions, such as a lower rent, reduced security deposit, tenant improvement allowances or free parking. Don’t hesitate to ask for these benefits, especially if you’re a strong candidate or if the property has been vacant for a while.
# 4 – Overlooking the Importance of Condition and Repairs
Tenants sometimes focus solely on the financial aspects of a lease and ignore the condition of the property. Ensure that you thoroughly inspect the property and document any existing issues or needed repairs. Addressing these concerns before signing the lease can help avoid disputes and ensure that the property is in good condition when you move in.
# 5 – Not Considering Future Rent Increases
Tenants sometimes neglect to address potential rent increases during lease negotiations. Inquire about any clauses related to rent escalation and negotiate terms that provide some protection against significant rent hikes. Understanding how rent increases will be handled can help you plan your budget more effectively. One more tip: pay close attention to expense increases and base year expense stops that are calculated separately from the base rent!
# 6 – Failing to Review Landlord’s Reputation
Neglecting to research the landlord or property management company can lead to unexpected issues. Look for reviews or ask current or former tenants about their experiences. A landlord with a poor reputation may be less likely to address maintenance issues or honor lease agreements.
#7 – Not building a team of professionals to help you
The most successful lease negotiations usually involve a team of professionals. A real estate broker with experience in leasing can save countless dollars, hours and headaches through the process and the duration of the lease. Other third-party professionals that are often involved in leasing are attorney’s, CPA’s, licensed contractors and architects. If you don’t know who and when to leverage these professional resources, your real estate broker will!
Negotiating a lease requires careful consideration and strategic planning. By avoiding these seven common mistakes and approaching the process with informed confidence, tenants can secure a lease agreement that meets their needs and protects their interests.
As always, if you have questions about your business and investment goals, I am happy to meet and help you build a strategy for your long-term success.
Hani Aldulaimi, CCIM
Managing Director
