Securing the Right Commercial Lease for Your Business

I recently joined a panel discussion hosted by the West Hartford Chamber of Commerce’s Business Resource Committee titled “Securing Your Space: Site Selection Secrets.” The panel, which included a commercial real estate broker, a property manager, and the Town’s Economic Development representative, provided insight into how local businesses can successfully find and secure their next location.

I talked about a few key takeaways, including the key terms that are negotiated in a commercial lease and why a lawyer’s involvement is crucial long before the final paperwork is signed.

A Lawyer’s Core Mandate: Clarity and Advocacy

The most critical function a lawyer provides in any commercial real estate transaction is simple: removing ambiguity and protecting our clients. A commercial lease can span dozens of pages of dense legal text. When complex issues are left unclear, such as who pays for maintenance, how are operating expenses calculated, or how can the lease be terminated, a business risks costly disputes and budget-busting expenses down the road.

A lawyer’s role is to scrutinize every clause, advocating fiercely for their client’s long-term interests and ensuring the lease is as clear as possible, leaving no space for assumptions or reliance on past “handshake deals.”

When to Involve Your Attorney: The Letter of Intent (LOI)

Many business owners wait until they are presented with a final lease agreement before engaging legal counsel. But the ideal time to involve a lawyer is much earlier: the moment you and your broker are ready to draft or review the Letter of Intent (LOI).

The LOI is often described as “an agreement to agree.” It is the first official, written step in the process. It summarizes the core economic and material terms of the deal: rent, lease length, renewal options, and who pays for key costs such as utilities, repairs, maintenance, and upkeep; but it is generally non-binding.

The LOI is a vital first step. If you and the landlord cannot agree on these general terms at this preliminary, non-binding stage, it is a good indication that the deal is unlikely to work out. While the LOI isn’t binding, once you’ve agreed to a term at this stage, it gets a lot harder to renegotiate, so it’s helpful to engage an attorney at this point in the process to ensure the foundational terms are favorable and avoid wasting time and money on a deal structured against your best interests.

Negotiating Beyond the Price Tag

A good attorney will negotiate far more than just the base rent. Your lawyer will help negotiate the entire economic and operational relationship between you and your landlord, including:

• Financial Terms: Negotiating fees, ensuring reasonable lease length, and defining clear renewal terms.
• Financing Integration: Coordinating with your bank to satisfy any lender requirements tied to your business financing.
• Build-Out and Improvements: Determining exactly how build-out costs will be handled, negotiating landlord allowances for improvements, or securing rent credits to offset your initial investment in the space.

Understanding Your Landlord’s Identity

Another point of differentiation I highlighted in our roundtable was the importance of understanding the identity and business practices of the person or entity you are leasing from. Business owners should consider what type of landlord they hope to rent from when deciding where to locate.

• Large Commercial Entities: Dealing with a big commercial real estate company often means working with iron-clad leases and predictable, yet sometimes rigid, processes. The clarity in their documentation can be an advantage, but they may be less flexible on customized terms.
• Small, Individual Landlords: Working with a small landlord who owns just one or a handful of properties can offer a more personal relationship and potentially more friendly or flexible terms. However, there is a greater risk of relying on “handshake deals” or verbal promises that may go south if the final written lease document is not explicitly clear.

A good attorney will ensure that regardless of the landlord’s size, your lease protects you from ambiguity. Our panel moderator advised that potential tenants meet and speak with other tenants in the building to get firsthand accounts of their experience renting from that particular landlord, providing a clearer picture before you commit to the lease. Your lawyer will ensure the documented lease terms align with your expectations and risk tolerance for that specific landlord relationship.

The Value of Using an Attorney

Entering into a commercial lease is a critical decision in the growth of your business and lease expenses can often be one of the largest expenses for a new business. Partnering with a business and commercial real estate attorney, like the team at Franklin & Frankel LLC, is an investment that can help provide you with certainty and clarity in the terms of your lease so you can move forward with confidence. We translate the complex legal language of a lease into clear, understandable terms that align with your business plan, ensuring your focus remains on growth, not unexpected legal battles.

Is your business planning a move or negotiating a new commercial lease in the new year? Contact our West Hartford office today to secure the legal representation you need.

You can catch the whole panel discussion on the West Hartford Chamber of Commerce’s YouTube channel, or check out the video below.