1. Base Year – As part of Tenant responsibility in a commercial building, you are accountable for your portion of the operating expenses. Your Tenant portion is calculated based on the percentage of the building you have leased, i.e. the size of the space.
The ‘Base Year’ is usually the first calendar year of your lease term. It is used as a starting point for future excess operating expenses, and an inaccurate amount could leave you up to your eyes in financial difficulty. For example, if you lease a space beginning October 2015, request that your base year is January 2016, not 2015, as the Landlord would prefer. Otherwise you run the risk of your portion including fees and repairs prior to your occupancy.
Another good practice is to make sure you are not responsible for the operating expenses for the first 12 months of your lease. If you want to forecast estimated future operating expenses, ask the Landlord to provide you with records from the previous years. It only helps, never hurts, to prepare for the future.
2. Tenant Improvement Allowance – It is extremely important if you are engaging in a build out to have it fully priced prior to signing your lease. A good Tenant Broker will make sure you completely understand the Tenant Allowance and a breakdown of the said agreement in writing. Not only that, have a General Contractor provide a written estimate to avoid the risk of any surprise bills from the Landlord.
3. Early Access and Holdover Period – The day you move into your space your monthly rent clock starts ticking although you may not be set up with furniture, phone lines or internet. To ensure you are not wasting time and money paying for rent before business begins operating in this new space, ask for Early Access at least one week before your rent is set to start. Early Access will allow you to setup prior to your free rent or monthly rent begins.
If you need to stay an extra month after your lease ends but want to avoid paying astronomical fees, make sure negotiate a Holdover Period. This way you are not subject to the Landlord charging you sometimes double, or even triple of your rent.
4. Expansion Clause – Having an Expansion Clause is like wearing pads during football. These clauses will protect you by enabling you to expand into more space in the building or park if you outgrow your space. An Expansion Clause will protect you from being injured by your current space, becoming defenseless and forced to sublease your space or lease non-contiguous space. Even if there is no space for expansion or relocation, an Expansion Clause can be written to give you the right to terminate the lease. Touchdown for you and your business!
Post from Your Finances Simplified