Why it Helps to Have a Real Estate Attorney in Your Corner When Negotiating Commercial Leases
Business owners learn quickly that almost every decision they make will affect their bottom line. Whether it is identifying and acquiring insurance, janitorial services or office furniture, finances are always kept in mind. This is one of the reasons business owners can be tempted to minimize the use of, or even completely forgo, the use of an attorney when negotiating a commercial lease.
While the ability to DIY on the fly is often a skill that business owners possess, it’s always important to remember why certain professionals may be called in to assist in getting a job done. A business owner could, in theory, learn about how to wire a building instead of calling an electrician to do so, but would this time be better spent running their business? Would it be just as safe? Could a second opinion on small details avoid potential issues down the line?
In the same vein, there are many good reasons for having a real estate attorney in their corner.
Getting Stuck with a Bad Lease Can Saddle Your Business
There are multiple types of business leases. There are net leases, net-net or double net leases, triple-net leases and more. Getting stuck with an unfavorable lease can cripple your business unnecessarily. It can stunt your growth, force you into making other less-than-optimal business decisions and limit your options in the future. An experienced real estate attorney will work to make sure your lease helps you reach your business goals but yet allows escape provisions should plans change. A lot can happen over the term of a business real estate lease and a professional can help anticipate those changes.
Knowledge of Current Market Conditions
A real estate attorney will likely have a much better handle on current market conditions for retail, industrial or office space in your area than a business owner may have. They may also have a longer-term point of view on where prices have been and where they may be going.
Understanding of Available Negotiating Points & Provisions
An experienced real estate attorney will have a full range of negotiating points and knowledge of crucial provisions that should be included business leases. A business owner may sometimes consider a lease could include items like:
- Janitorial Services
- Outside Signage
Even if these services aren’t particularly important to a business owner, they can still be useful negotiating tools.
Keeps Negotiations at Arm’s Length
A real estate attorney can help keep negotiations at an arm’s length between the business owner and the landlord. This is a good way to avoid hard feelings or damaging a relationship before it gets started. A business owner should want a good relationship with a landlord, and a real estate attorney can help make sure the relationship gets off to a solid start.
Gives a Business Owner More Input and Impact on a Lease
Generally speaking, business leases are prepared by, and in the interest of, the landlord. Even if certain points, provisions, and rates may be negotiated, the overall lease will ultimately lean in the landlord’s favor. Being a landlord is a business in itself and they, too, would like to make money rather than give it away. Getting a real estate attorney involved early can better shape the entire language of the lease to be more favorable toward a business owner while understanding what a landlord might need to consider it a profitable venture.
Makes Sense to the Bottom Line
In the overall totality of and length of a business lease, getting a real estate attorney involved makes sense, especially when considering what is at risk. If an attorney charges $200 hourly and takes 15 hours to complete the project, the total legal costs would be $3,000 and are deductible as a business expense.
A business renting 2,000 square feet of space at $20 per square foot annually would pay $40,000 per year in rent. The value of that lease is $200,000 over a five year period. The legal fees would amount to 1.5% of that amount. Not only is that a solid value, but odds are pretty good those fees would more than pay for themselves in lower rents or more favorable lease provisions.
Before going it alone, every business owner should consider the benefits of having a real estate attorney in their corner when negotiating a business lease. It simply makes sense.
Khashayar Law Group