A Business-First Approach To The Practice Of Law

Negotiating your first commercial lease?

On Behalf of | Nov 26, 2021 | Real Estate |

Negotiating favorable commercial leases is one of the most crucial steps toward the success of your business. After all, leases will often make up one of the biggest expenses of your company.

It is important to have a contract that covers every key tenant protection that you need. Otherwise, even the most ideal of locations will potentially grow into a liability that could someday result in you going bankrupt.

Securing the right of first refusal

Forbes pins leasing space as one of the top three expenses that business owners will face. Because of that, you want to ensure that you have a solid contract for your commercial lease that will protect you and your assets.

First, you want to ensure that you have a secured right of first refusal. The right of first refusal – ROFR – means that you receive any notifications of third party offers to purchase the property you currently lease. In some situations, having a third party buy property you work from could result in you having to pack up and relocate your business. However, with ROFR, you have the opportunity to match the terms and price offered by the third party and buy the property first.

Negotiate a renewable lease and termination safeguard

Next, you want a renewable lease. These rights will allow you to extend the contract and continue staying in your location of choice for longer than the initial contract period, whether long or short.

Finally, safeguard against early termination. This could allow for you to pay a cancellation penalty instead of the remaining rent in the event that an emergency happens and you need to move, downsize or even file for bankruptcy, among other financial disturbances. If you have these provisions, you will have a much easier time.

Founding Partners Damaso W. Saavedra and Allyson D. Goodwin