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What factors should be considered when signing a business real estate lease?
A:
If the location you have found for your business requires you to sign a lease, you need to consider several critical points before signing:
- What is the term of the lease? Most businesses tend to start off by either growing rapidly or folding quickly. Thus, you may be better off initially leasing on a month-to-month basis or for as short a lease term as you can get, such as three or six months, even if the monthly rent is higher than for a longer lease.
- Will the landlord permit you to make necessary improvements and alterations to the leased premises? If you need to make such alterations to make your business viable, be sure in advance that your lease allows them. Also, if you will be making significant (expensive) improvements, you probably will want to protect your investment by obtaining a longer-term lease, or at least a lease with the right to renew it on reasonable terms.
- Can you put up the kind of sign you need on the building? A business like a restaurant or a retail shop can be devastated if the landlord doesn't permit a sign that is sufficiently visible to passersby.
- Will the local health department, fire and police departments, air pollution control authorities, and zoning rules permit operation of your particular type of business at the location you have chosen?
- Is your location in a high-crime area that will require expensive burglary insurance and security precautions? If so, has your business plan budgeted for those additional expenses?
- Is there enough parking nearby or good public transit access for customers and employees?
- Does the lease provide you with an option to renew -- and at what rental price -- after the initial term expires?
- If the lease is for more than just a few months, do you have the right to sublease or assign the lease? If so, under what conditions or restrictions?