Questions to Ask When Considering Small Commercial Space

When working on a small office or retail space deal, don’t forget to ask all of the right questions. These are just the basics. Click on the “commercial” post category for other considerations that can be overlooked at a great expense to an unrepresented tenant.

  • Do you understand the true space costs? Are you performing a true “apples to apples” analysis when comparing different properties? Do you fully understand the different lease types, such as Full Service, Gross, Semi-Gross, Net, Triple Net, etc.? Are you taking into account the Landlord’s interior finishes and materials, tenant Improvement (TI) contributions, useable vs. leasable space, and lease incentives?
  • What is the base rent on usable square footage? Many commercial leases have a base rent, that is, what you pay for the actual square footage of the space. But “loads” and “CAM” (Common Area Maintenance) fees may be added to this rate, increasing your monthly rent. List in the lease exactly what your CAM fees will cover and not cover, how often they are to be paid, and how much they can be increased each year. If you will be required to help with the cost of major renovations like parking lot repaving, or any type of structural repairs get it in writing. Have the landlord list when these repairs we last made and when they are scheduled or anticipated to be done in the future.  CAM fees might include security, advertising, permits, landscaping, snow removal and system repairs.
  • Are there any special taxes, property fees other fees? If so, get them in writing. Make sure each fee is identified individually, how much each fee will cost you, and how often you will have to pay the fee(s).
  • Who Pays for What? List specifically what is included in the lease and what is not included and who pays for each line item. Some costs that may or may not be included in the lease are utilities, property taxes, and maintenance such as cleaning, snow removal and lawn-care.
  • What public and private utilities can you use or access from your unit? Is the unit cable and telephone ready? If not, is it in an area where you can get these services and who are local providers? Will you set up your own utility accounts? Some landlords may pay your utilities and then bill you for them. Will the landlord be required to provide proof of what you really owe if you do not get billed directly from utility companies?
  • What is the length of the lease and the penalties involved in breaking it, such as losing your security deposit. How long will you need the space and how long will it meet your business needs?
  • Did you limit the personal guaranty? While Landlords typically want the Tenant to personally guaranty the entire lease, often we can negotiate a limit to the amount of the guaranty, in terms of dollar amount or the term of the guaranty
  • Is the space measured correctly? Did you verify the Landlord’s dimensions to make sure you are not paying rent on non-existing space?

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