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How are office leases negotiated?

On Behalf of | Oct 19, 2020 | Commercial Leases

Whether you happen to be a business owner looking for property space or a real estate owner that leases property to businesses, chances are that you might find yourself negotiating an office lease someday. An office lease is a type of commercial lease, and like other leases, is something all parties involved will negotiate to receive the best benefit possible.

There can be a lot at stake when it comes to negotiating an office lease. A business wants a good office location to operate out of. A property owner wants a tenant that will produce a healthy flow of rental income. If you are preparing to negotiate an office lease, Forbes explains what you might expect in your negotiation.

Negotiating for space

As a business owner, the amount of space you would want to lease would likely be one of your top concerns. Some businesses make the mistake of leasing too little space. When they want to expand later on, they find they lack the space to do so and have to renegotiate with the landlord for an expansion of space.

Conversely, some businesses lease too much space. Businesses that do not grow fast enough to justify the extra space find themselves needing to sublet the space so they do not lose too much money from leasing excessive space. If you are a property owner, you may have to grapple with whether to allow your tenant to sublease to other tenants.

Expanding the lease

Sometimes a business leases only part of a property. Other tenants might have leases on the rest of the property. As a business owner, you might want to lease another section of the property if a neighboring tenant decides to move out. To this end, you might negotiate an expansion rights clause or a right of first refusal provision to expand into a vacant space.

How to renew or end the lease

If you are a business owner, you might find that the leased space is perfect for your company and you may not want to give it up. To extend your lease, you would likely negotiate for a renewal rights clause to help you hang on to the property. But if you are a property owner, you probably want a termination rights clause that spells out what will happen if the business breaks the lease early. The business will likely want limits to damages for leaving your property early, so this could become a seriously contested point in your negotiation.