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I am in the process of moving out of my home office and renting commercial space.

I found a place nearby that I really like. It's clean, well-kept, and has plenty of room for myself and two employees, has a great view of main street, and the price is competitively priced for this area (only $375/month). There is only one other office for rent in the area - it's a little more expensive and the building is pretty run-down.

Bottom line: I want this office.

My problem: I was a little overwhelmed by the lease paperwork. It was 9-pages, tiny-print, all big legal words, and there were things that didn't make sense. So I showed it to my lawyer friend before I signed anything. He read it over and said I was right to be concerned about a number of things.

examples of problems:

  • He requirs me to purchase liability insurance, but he also said I would be responsible for paying a portion of his liability insurance. (He should only require one or the other.)

  • I don't plan on being late with the rent, but his late fees are ridiculous - $40/day for each day late (that's 1200 per month!).

  • The lease does not say he's responsible for snow and ice removal, and that I am liable if a person injures themselves (there are many tenants in this building - I would assume he should be responsible for clearning and ice.)

  • He says there are quarterly fees for cleaning and repairing common areas - but he doesn't say the exact amount... he just says he'll send a bill.

There are many more "shady" points, but you get the idea.

My lawyer tells me to simply tell him all the things I want changed and have him re-write the lease. That's easy for him to say - I can't imagine this guy is going to scrap his lease and re-write 20+ parts for me.

SHould I....

1) Go down the street to the more expensive office in the run-down building.

2) Approach the landlord with a laundry list of things I need him to change in the lease. (He doesn't seem like a patient man, I think he's going to tell me to sign it or walk away.)

3) Just sign the thing so I can finally move in and get back to my business.

I am a little overwhelmed right now and I'd appreciate any thoughts on my situation. Thanks.

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4 Answers

up vote 7 down vote

You already have the correct legal advice, now use it.

Take the lease and cross out anything you don't like.

Add in all the things that your lawyer says are missing. (Type up a page or more in Word).

Set your own maximum fees for things he mentions but doesn't price out. Your rent should cover maintenance- so set that item to zero.

Set your own reasonable late fees.

Give him that contract. He can either accept it, negotiate, or tell you to walk.

You lose nothing by doing this.

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Thanks for the replies everyone! Here's the latest - I approached the landlord and requested the changes. He told me "I'm willing to make a few changes, but not rewrite this whole lease." So I walked away from the lease. On the way home, I did a little driving through the neighborhood, and I stopped in to chat with many local businss owners to see if they knew of other office spaces for rent. I have a good lead o a possible new office space. – steampunk Jul 25 '10 at 13:05
We've been given contracts where a bank in another country had to approve any loans we got. Classic over-charging lawyers. Just cross out what you don't like and send it back. – james Jan 18 '11 at 2:13
up vote 2 down vote

The biggest lesson I have learned in my career (as a serial entrepreneur!) is to trust my gut.

It seems from your writing that you are concerned about this guy so be careful.

Having said that it does not seem like there are many options.

Ask to see copies of the last few quarterly bills so you can see how much they are.

Ask who is responsible for ice/snow.

Late fees are what they are, if you are not going to be late don't worry about those.

Liability and liability insurance seems to be the biggest problem here, have a discussion with him about it and find out why there is the seemingly double insurance and also ask are you responsible for accidents within your office walls or outside your office walls?

If he is not reasonable about it I would take that as a big red flag.

Also consider these questions: what is the length of the lease? What is the notice period? What is the deposit?

I ask those questions because if worst comes to worst and you have to move out how bad off would you be?

Hope that helps!

Roger

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+1 re trusting your gut - starting a business is hard enough without having a dodgy landlord to deal with. I agree - if the guy doesn't want to be reasonable with you, leave it and look elsewehere, much though you obviously hate to do so. Maybe you could hold of renting for a little while, or take temporary premises (as provided by people like Regus) - more expensive but low hassle... – Steve Wilkinson Jul 24 '10 at 17:19
up vote 2 down vote

Number 2 sounds reasonable.

Let him know you want the office. Also tell him this is a first lease for you and you'd appreciate his time to answer several questions about the terms of the lease.

Obtaining liability insurance is standard for all leases. Many of the questioned items (like late fees) are there to protect landlords from the all-to-common deadbeat tenant. Landlords want to make it clear they are not there to help fund your start-up! As long as you're a stand up guy, they don't matter.

It is very reasonable to know what your cleaning & common fees will run. He should be able to provide in writing a current/historical amount and a percentage growth cap.

If you can work the lease out, you get your office. If you can't arrive at an equitable agreement, you'll be able to walk away with a clear knowledge that this was not the type of landlord you're wanting to dealing with.

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Thanks for the reply, Keith. I'm a landlord myself (I own some rental apartments), so I can definitely understand he need for late fees and insurance. I am certainly able to pay the rent, but this seemed excessive. Also - I already plan to have my own liability - I don't think it's normal to double dip by requesting I pay HIS insurance AND purchase my own. I did approcah the landlord to discuss the lease. Unfortunately we were not able to cme toan agreemet. As you said, I was able to walk away wih clear knowledge hat this landlord was not right for me. – steampunk Jul 25 '10 at 13:11
up vote 0 down vote

Go with #2 definitely. The nice thing is that the lease is only 9 pages. Most leases are 20 to 40 pages long. Offices leases are typically going to be one of a company's top 3 expenses so do everything you can to negotiate not only the renal rate but also the actual lease contract, and be prepared to walk away if you do not feel comfortable with the deal. Your total monthly and yearly costs should be clearly defined so you are not surprised later on. General liabilty and property insurance will be always be required by landlords.

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