5 Questions to Ask When Renting a Space for Your Business
When you start or run a business, you have so much to think about. You want to do what you can to minimize those worries. Start by asking these questions to your potential landlord about your rental space or lease. Knowing this information ahead of time means you can make informed decisions and avoid potential trouble down the road when it comes to rental prices, insurance, parking, subleasing and other important aspects of being a tenant.
1. What's Included in the Rent Price?
Naturally, the price of the rent may be one of your biggest concerns, but the actual price isn’t all you need to know. Commercial rent isn’t like residential rent. There are different types of leases, and in each one, the rent amount represents something different. Gross leases, which are most common, mean you pay a flat amount each month and you don’t have to worry about operations, taxes or repairs. A net lease means you pay a portion of the taxes, while a net-net lease means you pay for a portion of insurance, too. Triple-net leases mean the renter pays all repairs and operating costs, and these types typically apply to industrial businesses. In a percentage lease, you may pay a flat amount plus a percentage of your business income.
2. What About Insurance?
As mentioned, if you have a triple-net lease, you know you’re going to pay a percentage of the insurance on the building. If you don’t have this type of lease, ask who's responsible for those payments. While renters insurance is fairly inexpensive, you’ll need to know if you’re responsible for it before you agree to a certain amount of rent and assume that’s all you have to pay (along with your utilities). This is especially important if you’re renting space in a building or shopping center that has multiple tenants. In this case, many landlords insure common areas, like bathrooms, stairs, elevators, lobbies and sidewalks, while the tenants provide their own form of insurance to cover their rented spaces.
3. Will the Rent Price Increase?
Because commercial leases typically last for multiple years at a time, there may come a time when your rent amount is set to increase. Many landlords include clauses in their leases that spell out the specifics, like when the increase will happen and how much the increase will be. Not all of them do that, however, so it’s important to bring up the topic before you sign anything. The landlord may also specify that you're responsible for any increases in the prices of taxes, insurance or utilities that may occur during the lease period. In some cases, you may be able to negotiate certain prices and timelines when it comes to potential increases. If there’s something you aren’t clear about, you may want to have a lawyer or commercial real estate professional look over the lease before you sign.
4. Can You Sublease?
As a general rule, it’s best to rent a space that’s a bit bigger than what you actually need, especially when you're starting a new business. This ensures you have room to grow, especially if you have a long-term lease. But that isn’t always possible, and you may end up growing at rates beyond what you expected. In this case, you’ll want to find out if you can sublease the space. The landlord may agree that you can allow another tenant to take over the space if you move out, but there may be some strict rules about who can move in. For example, if you’re renting a space in an upscale shopping mall, the landlord may not want a liquor store or pawn shop moving in.
5. What Amenities Are Available?
Finally, it’s important to talk to your potential landlord about amenities so you’ll know what kind of extras are part of your lease. For example, if the building has security, can you take advantage of it or do you need to hire your own? The same goes for Wi-Fi, restrooms, lounge areas, cafeterias, meeting rooms, break rooms and other common areas. Find out if anything is off limits for you and your staff and customers. You’ll also want to ask about parking. Can your customers and staff park anywhere, and will it cost anything? Is there enough parking for the customer base you expect? Finding out about signage and advertising is also important so you understand what you are and aren't allowed to display.