What Small Business Owners and Entrepreneurs Need to Know Before Signing a Lease

Small Business Entrepreneurs commercial lease

"There's nothing I can do?"

That's the question countless business owners ask attorneys after they realize that they've signed a commercial lease they want to get out of, but are stuck with for another 3 years.

It's an unfortunate but common situation. Here are some things to know to keep you from asking that same question.

1. It is okay to negotiate terms.

Small businesses and entrepreneurs are often so excited about finding the "perfect space," that they become too nervous to question the terms of the agreement. You don't have to be. Not only is it okay to negotiate the terms; it is encouraged. 

Many commercial leases were drafted in favor of the property owners so the language offers few if any protection for the tenant. If a business owner doesn't speak up, he's bound to be roped into a longterm contract that does not benefit or protect him. 

My father always reminds me that, "The worst thing they can say is no." Remember also that the best thing that could happen is that they say yes. Don't be scared to ask the property owners about how they determined the figure they are charging you with. Ask for information regarding other spaces in the facilities. Negotiate the length of the lease agreement.


2. Business owners entering into lease agreements are expected to know more.

In most states, the law makers and courts have tried to understand that people may not be as sophisticated as the mortgage companies doing business with them, so there are laws that set basic standards. In contrast, commercial leases don't. 

Most states hold business owners to a higher level of sophistication and therefore expect them to have read, understood, and agreed to the terms of the contract. The courts will be reluctant to cut a small business owner slack if the contract is not absolutely unreasonable (actually the better term is unconscionable). That being said, it is absolutely essential to understand all the terms in your leasing agreement. .


3. Exit clauses are important. Fight for them.

The saying goes, "the only constant is change." Business ownership and development included. Therefore, it is important to pay attention to the terms in the contract that deal with what happens if something changes and your business is no longer able to use that location. 

Be sure to negotiate opportunities for reasonable exit through the use of things like subleasing shorter lease lengths. Examine how much time the landlord requires before you can move out and see if it needs to be adjusted to be more reasonable. 


4. The fine print matters.

The fine print that looks like "standard" information actually has an impact on your lease. That fine print could be you giving up your right to fight when the landlord does something wrong. That fine print could also be extra hidden fees that are extremely common on commercial leases. 

The point is understand what you are signing. And if you try to or you know that your time is too valuable trying to understand the crazy legal jargon of your 10 page document, hire an attorney to help you. That's a decision you won't regret.