Keep Your Landlord on a Short Lease

As a potential or current commercial real estate tenant, there are various building operational items and lease language items that you should ask for, and, in some cases, demand, to help reduce your office space lease-related business expenses. Remember, all lease items are negotiable. Depending on market conditions, you may not always get everything that you want, but the more knowledge that you possess will help you make a better deal. Next time you negotiate a lease, be sure to look into the following items:

Operational Items

Who owns the property? Is the owner financially solvent?

Always make sure that the owner of the property has the financial resources, such as tenant improvement money and operating funds, necessary to properly operate the building.

Is there a good preventative maintenance program in place?

Ask to see the maintenance records. Ask to tour the engine room and the related fan rooms. Better yet, take a qualified building maintenance mechanic with you on the tour. A portion of the expenses of all repairs made after you move in will be paid for by you in the form of operating expense escalation.

What is the tenure of the staff?

The longer the maintenance and management staff have been at the property together, the better and more efficiently the building will be operated. The staff’s combined knowledge of the building systems, other tenants, vendors, and local municipal requirements will help enhance efficiency and your occupancy comfort.

What special lease provisions do other tenants in the building have?

Many times, an anchor tenant may have received special services from the landlord, such as exclusive elevator service, extra security, and additional hours of operation. These additional services can cost you in the form of operating expense escalation and can negatively impact your space comfort and efficiency.

Are there any environmental concerns in or around the building?

You should know if there is asbestos in the building and the quality of the building’s indoor air. Make the landlord state , in writing, the status of any such issues. These conditions can be expensive to correct and, in some cases, they can cause health concerns.

Lease Items

Audit the books.

Always insist on the right to audit the landlord’s books. This helps to ensure that the landlord is careful to maintain accurate billings.

Measure your space.

Most tenants accept the landlord’s square footage figures. This can cost you thousands of dollars over the term of your lease. Fifty extra square feet at $20 per square foot for five years will cost you $5,000 in additional base rent payments — not to mention the additional operating expense escalation payments.

Know the overtime service costs.

Always make the landlord state, in writing, the actual cost of any services that he may provide, such as overtime air conditioning and heating and additional utilities. Do not accept the language “reasonable cost” in your lease. This language enables the landlord to include large mark-ups and add on percentages in the billings. If other tenants use the same service as you do at the same time, you should also have your billings pro-rated.

Set temperature and humidity parameters.

Your lease should include the space temperature and humidity requirements for your operation. In today’s technology-driven business world, the landlord must be responsible to provide the space environment conditions that you will need.

Paying attention to these items will help make negotiating a lease for your office space more positive. However, the most important thing to remember is to always ask questions. Knowledge is key.

Edward M. Eriksen is Principle of the Tenant Advocate Group. He can be reached at www.tenantadvocate.com or at ed@saltman.com, or by calling (800) 699-4901.