Question

Small business

Explain the issue an entrepreneur should be aware of in negotiating a lease.

Answer 1

The various points which must be considered by the entrepreneur while negotiating a lease are as below:-

Term of the lease: -Commercial lease can be made for 5 to 20 years having an option of renewal. But these terms can be negotiated well. If the entrepreneur in investing a lot of fund and resources in improving the property, then he can negotiate on the term of the lease.

Beginning date of the lease:- If there is a lot of construction work required in the property, then the negotiation can take place on the beginning date of the lease. The entrepreneur can ask the owner to start the lease on possession of the property.

Kick out Clause:- This clause is used after a certain period of time if the desired returns are not gained from the investment. This period can be ranging from 2-5 years.

Co-tenancy agreements:- If the property is rented by two or more tenant, then the entrepreneur can negotiate at the beginning that on the event of one of the tenant leave, then rent paid will be lesser

Tenant improvements:- In place of spending own funds for the improvement of the property, the entrepreneur can negotiate with the owner to improve the property as desired or even providing the basic infrastructure.

Common Area Maintenance (CAM) fees:- These fees can be varied or fixed depending upon the negotiation. Thus entrepreneur must give due consideration while negotiating these issues.

Exclusivity clause:- This is the clause where the entrepreneur can ask the owner not to rent the nearby property to competing businesses.