Negotiate the Best Lease For Your Business by Attorneys Janet Portman and Fred S. Steingold 2nd edition Nolo’s Legal Updater We’ll send you an email whenever a new edition of your book is published! Sign up at www.nolo.com/legalupdater . Updates @ Nolo.com Check www.nolo.com/updates to fi nd recent changes in the law that aff ect the current edition of your book. Nolo Customer Service To make sure that this edition of the book is the most recent one, call us at 800-728-3555 and ask one of our friendly customer service representatives. Or fi nd out at www.nolo.com .  e law changes, but Nolo is always on top of it! We off er several ways to make sure you and your Nolo products are always up to date: NOLO always up to date 2 1 3 We believe accurate and current legal information should help you solve many of your own legal problems on a cost-effi cient basis. But this text is not a substitute for personalized advice from a knowledgeable lawyer. If you want the help of a trained professional, consult an attorney licensed to practice in your state. NOLO please note Negotiate the Best Lease For Your Business by Attorneys Janet Portman and Fred S. Steingold 2nd edition Second Edition JULY 2005 Editor MARCIA STEWART Illustrations LINDA ALLISON Cover Design TONI IHARA Book Design TERRI HEARSH Production SARAH HINMAN Proofreading EMILY K. WOLMAN Index THÉRÈSE SHERE Printing CONSOLIDATED PRINTERS, INC. Steingold, Fred. Negotiate the best lease for your business / by Fred S. Steingold and Janet Portman. 2nd ed. p. cm. Rev. ed. of: Leasing space for your small business/ by Janet Portman and Fred S. Steingold. 1st ed. 2001. Includes index. ISBN 1-4133-0216-5 1. Commercial Leases. 2. Office leases. 3. Small Business Management. I. Portman, Janet II. Portman, Janet. Leasing space for your small business. III. Title. HD1393.25P67 2005 658.15’242 dc22 200540536 Copyright © 2001 and 2005 by Nolo and Fred S. Steingold ALL RIGHTS RESERVED. Printed in the U.S.A. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise without prior written permission. Reproduction prohibitions do not apply to the forms contained in this product when reproduced for personal use. For information on bulk purchases or corporate premium sales, please contact the Special Sales Department. For academic sales or textbook adoptions, ask for Academic Sales. Call 800-955-4775 or write to Nolo, 950 Parker Street, Berkeley, CA 94710. Acknowledgments We couldn’t have written this book without the assistance and support of many people. We’d like to thank Jake Warner, Nolo’s founder and executive publisher, for his conviction that we could write this book—and patience while we did it. To the extent that readers find the text clear and to the point, credit goes to our meticulous editor, Marcia Stewart, who can spot a mushy sentence a mile away and fix it in a trice. Others at Nolo who helped include: Stan Jacobsen, who provided valuable research assistance Tamara Traeder, who offered useful editorial advice Terri Hearsh, who designed the book and threw in a little editing, gratis, and Mike Mansel, of Argo Insurance Group in Pleasanton, California, who is technically not a Noloid but whose generous help on insurance issues over the years makes him part of the family. Thanks go also to the Practicing Law Institute, whose programs and materials on commercial leasing were invaluable. Table of Contents Introduction A. How Leases Are Made and What They Look Like I/2 B. How This Book Can Help You Negotiate a Favorable Lease I/3 Part I: Finding and Evaluating Space and Developing a Negotiation Strategy 1 What Kind of Space Do You Need? A. Do You Need to Move Now? 1/4 B. Setting Your Priorities 1/9 C. Rent, Deposits, and Improvements 1/10 D. Location 1/11 E. Length of the Lease and When It Begins 1/13 F. Size and Physical Features 1/16 G. Other Tenants and Services in and Near the Building 1/20 H. Parking 1/21 I. Building Security 1/21 J. Image and Maintenance 1/22 K. Expansion or Purchase Potential 1/23 L. Preparing Your Rental Priorities Worksheet 1/26 M. Subleasing Space 1/26 2 Looking for Space and Using Brokers A. How to Find Space on Your Own 2/3 B. Working With a Real Estate Broker 2/7 C. The Value of Hiring Your Own Broker 2/12 D. How to Find a Real Estate Broker 2/13 E. How to Choose a Broker 2/14 F. Signing a Contract With Your Broker 2/16 G. Handling Problems With Your Broker 2/21 3 Evaluating the Space and the Landlord A. Visiting and Evaluating Prospective Space 3/3 B. Further Investigation of Promising Space 3/8 C. Environmental Issues to Consider When Evaluating Space 3/12 D. Learning About the Landlord 3/18 E. Management Companies 3/24 F. Holding the Space With a Deposit 3/24 4 Understanding the True Size and Cost of the Rental A. How Landlords Measure Square Feet 4/3 B. Additional Rent: Gross Versus Net Leases 4/10 C. Percentage Rent—Sharing Income With the Landlord 4/13 D. Computing the True Rental Cost 4/15 5 Setting the Stage to Negotiate A. How Much Clout Do You Have? 5/4 B. Your Landlord’s Compliance With the Executive Order on Terrorism 5/12 C. Getting Past Deal Breakers 5/14 [...]... space Your home business is bursting out of the garage and definitely needs its own location Negotiate the Best Lease for Your Business is a useful guide that can help both the person considering a commercial lease for the first time, as well as the person who has been down this path before and would like to negotiate a more favorable lease for his or her business It’s helpful for all types of businesses—from... rent and other costs), you have the right to remain in the space until the lease expires And unless the other terms of the lease provide otherwise, they, too, are guaranteed for the life of the lease For example, your landlord cannot ignore the lease s promises to provide on-site parking and janitorial services You’ll need to decide whether to pursue a short-term or long-term lease a Short-Term Leases... detail.) 1/6 NEGOTIATE THE BEST LEASE FOR YOUR BUSINESS Resources on Home Businesses This book focuses primarily on leasing commercial space Of course, doing business at home is still a viable option for many small businesses Fortunately, there’s a lot of valuable guidance out there if you decide that home is where the business is—and will be for the foreseeable future The Legal Guide for Starting... are willing to pay for it The better you know your business, the easier it will be to describe your ideal rental Of course, it will be easier to list the “must haves” and the “not necessaries” if 1/10 NEGOTIATE THE BEST LEASE FOR YOUR BUSINESS your business is up and running, smoothly and profitably, than if you are just starting out and haven’t tested the market or the viability of your product or approach... to Negotiate Your Commercial Lease A How Leases Are Made and What They Look Like I/2 1 There Are No “Standard” Leases I/2 2 How Leases Are Organized I/3 B How This Book Can Help You Negotiate a Favorable Lease I/3 I/2 NEGOTIATE THE BEST LEASE FOR YOUR BUSINESS Y our business has been a success and you are ready to move into a better place You have decided to streamline your. .. directly to Part II, Common Lease Terms (Chapters 7 through 17) “Common Major Lease Clauses,” shown at the end of this I/4 NEGOTIATE THE BEST LEASE FOR YOUR BUSINESS introduction, will give you a quick roadmap to the dozens of specific clauses covered in the second part of the book Chapters 7 through 17 address specific lease provisions, their legal meaning, how they will affect your business, and how to... with your insurance policy and your loan documents, your lease will be one of the most important legal documents in your filing cabinet Typically, you’ll be working with a lease form that’s been written by the landlord or the landlord’s lawyer—and you can bet that neither one of them will be looking out for your best legal or business interests You need this book to even the playing field, so that the. .. A How Leases Are Made and What They Look Like The lease that you and your landlord sign defines your legal relationship It’s a contract in which: • you agree to pay rent and abide by other conditions (such as using the space for a consulting business only or not displaying outside signs unless the landlord first approves them), and • your landlord agrees to let your business occupy the space for a... north—we’re on the corner” can make access really convenient E Length of the Lease and When It Begins It may be important for you to secure a space that will be yours for a long time to come—or you might want the flexibility of a shorter lease Do you need to find a 1/14 NEGOTIATE THE BEST LEASE FOR YOUR BUSINESS place right away? Or do you have the luxury of shopping around until you see the perfect spot?... priority—to the length of the lease and when it’s available This section provided an overview of key issues regarding the term of a lease For a more extensive discussion, see Chapter 8 1 Length of the Lease The “term” of your lease means its chronological life Your lease could be as short as month to month, or run for one, five, ten or even 15 years As long as you satisfy the important conditions of the lease . want the help of a trained professional, consult an attorney licensed to practice in your state. NOLO please note Negotiate the Best Lease For Your Business by. Fred. Negotiate the best lease for your business / by Fred S. Steingold and Janet Portman. 2nd ed. p. cm. Rev. ed. of: Leasing space for your small business/