How do you negotiate the terms of a commercial lease agreement?

There’s something that comes first, especially in this day and age when companies don’t necessarily know how they want to exist in space. So the first thing you need to consider is what your business really needs not just now but into the future. In my experience, a good architect can help you with that vision.

Again, there’s an important step here: what is important to you. Is it pure dollars and cents or does a specific location matter or quality matter? Do you need flexibility in lease term and an ability to expand or are you more focused on a specific amount of space for the duration?

Watch out for the Landlord's ability to relocate you into another space. Many times, especially in retail leases, landlords want the ability to make room for bigger or higher paying tenants. If you have carefully chosen your location, this could be devastating to your business. A good real estate attorney can take the teeth out of this clause, if not get it deleted altogether. Another clause I have seen more often recently is Landlord's ability to terminate the Lease in the event they elect to redevelop. This should be a non-starter, unless there are unusual circumstances agreed to from the beginning, or there is a giant check written to the Tenant to compensate them in the event of an elective termination by the Landlord.

Yes! Now you’ve figured it your vision and your priorities, now you can focus on the precise economic terms of the lease. And those terms tend to include things that don’t appear to be economic but really are, such as your right to assign and sublease or your rights on (yawn!) casualty or eminent domain. But these can seriously impact the bottom line.

This is so market driven. You can’t have one size fits all negotiation style - if you are a tenant and it’s a red-hot landlord market, you can’t come in like a bull in a china shop. On the other hand, if landlords are hurting, use that to your advantage. You don’t have to be mean about it- but you can confidently negotiate if you know your leverage.

I am digesting all of the great advice. Always be kind and stand your ground. Sometimes it is simply better to wait or walk. Some of my best and smartest decisions come after reflecting on alternative choices.

The most leverage a Tenant has is at the LOI stage, where problems can be eliminated before they appear in the Lease, especially with the help of a good real estate attorney. Once an LOI is agreed upon, a Tenant's leverage goes down, as Landlord usually knows Tenant is committed, at least emotionally, if not financially. If Tenant can walk away from the Lease, it creates an entirely different environment for negotiations. In the course of over 20 years of negotiating leases (mostly for tenants), I have found this to be the single most powerful leverage point a Tenant can use, and in 99% of the cases, a Landlord will back down from whatever unreasonable provision they were insistent upon before.

Taking advice from a Solicitor before signing is vital. Getting advice as early in the process as possible will aid you with understanding your options, negotiating terms and completing the deal in a timely manner.