Law Office of Henry B. LaTorraca Civil Trial Attorney

Negotiating the terms of commercial real estate leases

Commercial lease negotiation is a common practice in California. Landlords expect that most business owners will try to negotiate the terms of their leases. Business owners do this so that they can minimize their expenses while also securing terms that are more favorable to them, allowing them to devote the money they save to growing their companies.

When the real estate market is weaker or the target property is in a location that is not deemed to be a prime one, property owners may be much more amenable to negotiating lease terms. Business owners who believe the property's location is ideal for their companies may want to start by agreeing to a longer lease term. Doing so may help make the property owner agree to concede in other lease areas.

The business owners may then want to negotiate the price per square footage that is called for by the proposed lease. Landlords calculate the monthly amount to charge by taking the annual cost per square foot and then dividing that amount by 12. Negotiating a lower price per square foot will thus result in a lower monthly cost. Another term that business owners might want to consider is a provision for rent increases. Landlords normally raise rents according to a percentage each year. It is sometimes possible to get a grace period in place that is followed by a cap on the percentage of subsequent rent increases.

Business owners may want to get advice from their attorneys before signing a proposed lease for commercial real estate. An attorney may review the document and then make recommendations regarding the terms that the client may want to negotiate.

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