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Should you sign a letter of intent? Sometimes when landlords and tenants are in the midst of serious negotiations, they want to put their understandings down on paper -- but they usually don't expect that their writings will be the equivalent of a lease. A letter of intent is just that -- a communication indicating what the landlord and tenant would like to see happen in a lease. If the landlord asks you to sign a letter of intent, you should sign it to show you're serious about the space. But take care to make it clearly nonbinding, or else it can end up obligating you.
Are you aware that there is no such thing as a "standard" business lease? Unlike many other aspects of business, there are surprisingly few legal constraints on what tenants and landlords agree to do. Commercial leases can and should reflect the give-and-take between the landlord and tenant -- one size simply doesn't fit all. Even if the landlord starts with a form that's accepted by other tenants who lease from this landlord or printed and distributed by a big real estate management firm, it can always be modified.
Negotiating the Lease
Is the landlord asking for a "gross" or a "net" lease? In a gross lease, tenants pay a set amount per month, much like a residential lease. Depending on whether a whole building or part of one is being rented, the tenant will also pay all or a portion of the utilities. In a net lease, tenants pay for their square footage, plus a portion of the landlord's operating expenses, including the building insurance and taxes, plus utilities.
How long do you want your lease to last? Commercial leases typically last from two or three years to ten or fifteen. Only well-established businesses should commit to very long lease terms. For more information, see Negotiating the Best Commercial Lease Terms.
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