The Right Price: The Other Costs in Commercial Lease Terms Tenants Should Keep in Mind

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By James A. Schnur, CCIM
President and Designated Managing Broker
Integrated Real Estate Solutions

Once the perfect relocation spot is scouted and secured, and the paperwork is drawn up and presented, there is a strong temptation to rush through lease clauses and sign off without scrutiny to just tie a bow on the deal and be done with it. But rushing into signing a commercial lease without giving the terms a thorough read can have detrimental consequences, particularly financially.  Having a tenant representation broker as well as a competent real estate attorney provide their services in looking over a lease before it’s signed is critical in this respect. By doing the due diligence and bringing in expert help, commercial renters and buyers are able to address many easily overlooked lease terms — such as the following — and avoid any costly oversights in the process. 

Common Area Maintenance and Space Expenses

Many landlords and owners will factor in the physical space, and upkeep, of the common areas within the building into the lease for renters. This means each tenant is responsible for a portion of the costs of the lobby, the restrooms, hallways, and occasionally, parts of outdoor areas. These types of cost are typical, but be wary of landlords who will attempt to pad measurements, and make sure to double-check the math. Having all of the measurements and figures verified, as well as what portions of upkeep are a tenant’s responsibility (i.e. mowing, cleaning, lighting, trash removal, etc.) is a necessity. 

Repairs vs Replacements

The lease will include terms on the types of utility repairs tenants will need to cover, including HVAC, plumbing, sprinkler, and electrical repair costs. Generally, this will be covered by the landlord including a service contract between the tenant and dedicated maintenance companies to cover any potential repairs or issues that arise. By the same token, it is commonly the responsibility of landlords or owners to cover larger expenditures to the property, such as full equipment replacement. This is part of balancing the reasonable responsibility between landlord and tenant for maintaining the property and should be checked to ensure that tenants are not being forced into taking on greater responsibility than is reasonable.

Other Building Costs

Outside of the unit costs, a building may impose additional charges for its other services or spaces. For instance, a typically overlooked expense is building parking. While some leases will include a number of employee designated parking spaces, this varies from building to building, and landlord to landlord. These smaller expenses outside of the immediate scope of the rented space may not seem like much by themselves, but they can quickly add up over time.

Property Taxes

Depending on the type of lease, tenants will be responsible for some or all of the property taxes for the building, as well as the tax increases over the years. It’s important to verify the assessed value of the property versus the current market value of the property, and negotiate what is actually owed over the course of the lease, as this could end up costing tenants significantly if the building is suddenly sold during their tenure.  

In the end, the lease agreement needs to be balanced between the tenant and the owners or landlords. Ensuring fairness in the lease is easier said than done, but with the help of a commercial property tenant representative, tenants have an expert with a vested interest in their professional wants and needs on their side. Rather than navigating the process without help, a commercial tenant representative can act as a knowledgeable guide through the leasing process, and make sure tenants make it through relocation with the best possible outcome in their favor.

The commercial tenant representative brokers at Integrated Real Estate Solutions proactively look at commercial real estate opportunities and solutions that make sense on all levels for our clients. Leverage the experience and expertise by talking to IRES about your plans and vision, and IRES can help guide your business to the next relocation opportunity that makes the most sense for your continued success.

Integrated Real Estate Solutions, Inc. provides clients with the in-depth knowledge and experience that is critical to determine the right path to your next move, lease renewal, or strategic re-positioning of your real estate portfolio. Contact us or call 847.550.0160 today about your needs, and put our success to work for you.

Author: Jim Schnur

Jim Schnur is the President and Designated Managing Broker of Integrated Real Estate Solutions, Inc. Jim started the firm in 2003 after almost 20 years negotiating and overseeing real estate transactions at Hewlett Packard Co. and Agilent Technologies, Inc.

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