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Health & Fitness

Renting Commercial Space – What You Should Know

Except for home businesses, every business needs space to work. Most new businesses do not have the financial resources to buy commercial space. And those that are established are often not eager to tie up funds that could better be used to expand operations by investing in property. This is why renting commercial space is such a popular option. Commercial leases are often very different from residential ones and to go in for a commercial lease without completing due diligence is to take a huge risk. The terms and costs can have a huge negative impact on your business. There are 3 basic issues to be considered before signing a commercial lease.

The Lease Terms

The first point to consider is the duration of the lease. In the case of small businesses or startups that may not be completely sure of what their future space needs will be, it is recommended that the lease should not be for more than a 2 year duration. Rent increases during the tenure of the lease and renewal options must also be carefully negotiated and planned for so that unexpected increases in costs do not place an undue burden of cash flow. Because of the many variables of a commercial rental, the rental options that may be available and the type, quality and nature of the property and locale, it is a good idea to retain the services of a realtor with commercial property rental knowledge to guide you through the intricacies of the space selection, evaluation and the negotiation process. It can also be very useful to obtain the advice of an experienced real estate lawyer who will be able to ensure that the lease terms are fair and your occupancy is secure.

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Costs

Do not make the mistake of presuming that your monthly rental payments will be your only outflow on the space you occupy. Commercial leases often contain various other expenses that the tenant is liable to pay. These can include such costs as upkeep and maintenance of shared facilities (often referred to as Common Area Maintenance or CAM) and so on. And the utilities that you use will be at your cost. It is important to find out how these are measured – will your space have an independent meter or is the cost apportioned among tenants of a square foot basis. An independent meter is always preferable as you can be sure of paying only for what you use. It is also a good idea to meet other tenants and check with them about other costs they incur which may not be specifically listed in the lease agreement. Also check out the repair and maintenance terms. Some leases require the tenant to be responsible for all aspects of the upkeep of the property while others specify what the tenant is responsible for.

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Other Lease Terms

Among the other lease terms you should look for are:

  • If the anchor tenant of the property closes their dorrs and moves, a co-tenancy clause will allow you to break the lease if the anchor tenant is not replaced within a specified period of time.
  • An exclusivity clause will prevent the landlord from renting space to a direct competitor of yours.
  • You may not need all the space you lease immediately or may find that you have taken too much. In either case a sublease clause will allow you to cover the cost of the unused space by subletting it.

If for any reason you should default on rent payment, what are the consequences for you? Negotiate as many safeguards as possible in regard to extension of payment time, time before eviction etc. Eviction is very costly, to both parties.

Read the original article here:
http://www.buyshortsalehomes.net/Blogs/2013/July/renting_commercial_space_what_you_should_know.html

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