John Tobin might be considered a traitor by some. He used to
represent landlords and building owners in lease negotiations. He
negotiated top office space downtown in the East Ohio Gas Building and
the National City Center.
Two years ago, Tobin broke ranks and formed a tenant consultation
reps.net, taking all the secrets he learned as a broker and
using them to help tenants negotiate a better lease. He designed a
software package called Swiftcalc, which lets commercial tenants
visually compare several lease deals at once.
Tobin's No. 1 tip for getting the best lease agreement?
"Begin the lease negotiation process early," he says.
"Researching the alternatives can take three months, negotiating a
lease can take three months and constructing improvements at another
location can take three months. Allow a generous amount of
additional time for unexpected delays in the leasing process."
Tobin says it's important to carefully read the lease and watch for
these clauses and terms.
Ensure that the tax
and operating escalation language includes only standard items
Some landlords try to include items like building capital expenses that
are usually not passed on to the tenant.
No tenant has a
crystal ball for knowing the space needs of their business in the near
future. Negotiate maximum tenant flexibility to terminate early,
renew, expand, contract, assign and sublet.
"holdover" clause charges the tenant up to double the rent if
the tenant remains in the space beyond the lease expiration date.
This ensures the tenant will take action prior to its lease ending
date. A 200 percent holdover clause can usually be negotiated down
to 150 percent or 125 percent.
The substitution of
premises clause allows the landlord to relocate the tenant elsewhere in
the building as needed. This can either be stricken from the lease
or watered down to reduce its economic attractiveness to the landlord.
Bonus tip: Hire a local architect to verify the square footage in
the lease is accurate. HOW TO
reps.net (216) 858-1000 or www.tenantreps.net
Morgan Lewis Jr. (firstname.lastname@example.org)
is a reporter at SBN Magazine.