Eventually, you may find it necessary and preferable to rent commercial space for your business/studio. This PhotographyTalk article includes 7 tips that will help you negotiate a lease with the property owner that protects your wallet and makes the process less stressful.
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At the writing of this PhotographyTalk article (February 2012), the commercial real estate market is still trying to rebound from the recession, meaning there is a glut of commercial properties. In other words, it’s a buyer’s market. More property owners are currently willing to negotiate a lease that could be more advantageous to you than during a robust economy. Even if you may not need commercial space for a year or two, and can afford it, now may be an excellent time to lease space. The economy will rebound; and when it does property owners will have the upper hand and won’t find it necessary to give you such a good deal. Lock yourself into a two- or three-year lease now and you’re apt to be paying less during 2013, 2014 and 2015 than business owners who wait until then to sign a lease.
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If you’ve decided to lease commercial space for your photography business, then your first step is to meet with your attorney. PhotographyTalk has recommended in many of its photography business articles that you should have an attorney, especially if you’re operating a full-time photography business. Explain that you intend to lease commercial space for your business and you would like any guidance him or her could provide. It’s a good idea to understand any tax, liability or other financial implications of being a commercial property lessee. Show your attorney the lease BEFORE you sign it! If you can afford to pay for his or her time, then you can even ask your attorney to accompany you when negotiating the lease.
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Then, it’s time for some homework. Find several locations that will serve your needs, and then look for a few properties for rent in those areas. You want this information to make some comparisons and to have a lease amount in mind before you first negotiate with a property owner. If you find one or two spaces that are your favorites, then don’t hesitate to visit and talk with other commercial tenants in the building. Ask them about their relationship with the property owner. Is he or she someone with whom you want to sign a lease? Does the owner attend to maintenance issues immediately? Is the building fully leased or are there many empty units? Not only will this kind of information help you make a better choice, but also give you an advantage during lease negotiations.
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Another homework assignment is to contact commercial real estate brokers/companies that lease properties where you would like to locate your photography business. They can advise you about the current status of the market and what lease cost and terms you can expect. Remember, these brokers/agents represent property owners, not you, so expect them to try to steer your choice toward a property on which they would earn a commission.
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The cost and the number of years of the lease are the two primary negotiating terms. The U.S. Small Business Administration recommends a one- to two-lease initially, with the option to renew for a third or more years. You also want to factor in and negotiate rent increases during the term and renewal options, so you are not unexpectedly hit with a rent increase without warning.
Armed with the information you’ve researched, you should be able to determine if what the property owner is offering is reasonable. Don’t hesitate to make a counteroffer and show the agent or owner the hard evidence on which you are basing your offer. A common negotiating strategy of commercial property owners is convincing you to sign a longer-term lease than you wish. Stand your ground and state that you will only sign a lease for X number of years.
Other terms that should be discussed and negotiated before you sign a lease include:
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Who is responsible for maintenance and repairs: shared systems, such as HVAC, and, for example, plumbing or electrical repairs in your unit.
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Any fees the owner may add to cover maintenance and common utility costs.
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How the utilities you use in your space are metered, individually or commonly and charged according to the amount of square feet you occupy.
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Be prepared for the worst scenario: If your business goes south and you default on your lease, then you want to know in advance how the owner will react and what steps he or she might take to evict you.
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Consider negotiating these add-on clauses to the lease to protect your investment and long-term business interests.
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Sub-lease – You’ll have the flexibility to sublet your space to another business if your business plans change.
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Exclusivity clause – Prevents the landlord from leasing any other premises on the development to a direct competitor of yours.
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Co-tenancy – If the development has an anchor tenant, such as a known retail brand, and the tenant closes, a co-tenancy agreement can protect you from a potential loss of customers by allowing you to break the lease if the landlord doesn’t replace the anchor tenant within a specified time period.
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Don’t be afraid to stop negotiations at any time you don’t like what you are being offered. There are always other properties to lease. Don’t be surprised if the stubborn owner contacts you and offers you better terms because you were willing to take a walk!
The information in this PhotographyTalk.com article is general in nature. PhotographyTalk.com does not provide legal advice or imply legal strategies for photography business owners. They should seek such advice from qualified professionals.
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