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There are several things you may wish to negotiate about the deal. Keep in mind that you will probably not get everything you want, so identify the deal breakers for you and negotiate them first. Here are some things that are usually negotiable:
- Lease term. Most landlords require at least a one-year lease, but others want 3 years. For your first venture, I would not recommend signing anything over 3 years in duration. You do want a lease, though, instead of going month-to-month. Remember, a lease protects both you and the landlord. If you successfully negotiate a short-term lease, make sure to ask for an option to extend the lease as well. Don't worry too much if the option terms seem high as you can re-negotiate that when it's time for you to renew.
- Rent. If the asking rent seems very high compared to comparable properties, then mention this and don't hesitate to propose a much lower rent. For instance, if the center has a lot of empty stores, perhaps you could negotiate a discount until it fills up. If the asking rent is $13/square foot and the landlord wants a 3-year lease, then one option is to propose to pay stair-stepped rent (i.e., $9 for the 1st year, $11 for the 2nd, and $13 for the 3rd), ending up at the asking rent. Another tactic is to mention that you don't really need that much square footage and you'd prefer a store of x square footage and offer to pay the asking rent but only multiplied by your desired square footage, instead of the actual square footage. (If you go this route, make sure the CAM is calculated the same way.)
- Buildout/repairs. If the space is not in move-in condition then you can usually negotiate a repair allowance or money for building out an unfinished space. If you're not handy or don't want to be bothered overseeing the repairs, then try getting the landlord to handle them. Just make sure you specify in the lease exactly what needs to be done and when it needs to be accomplished by.
- Free rent. Landlords will usually give you 1-3 months free rent to cover the time needed to get your store set up.
- Parking. If it seems like parking may end up being a problem for your customers, then you can try to negotiate a couple of dedicated spaces with signs.
- UV Protection. Sunlight is very damaging for books. If the storefront windows do not offer UV protection, then you can try to get the landlord to pay to have a protective film applied or to replace the windows.
- Escape clause. If you are interested in the center because of the synergy between your store and one or more of the current tenants, then you may wish to negotiate an escape clause that lets you terminate your lease if x tenant leaves or if x% of the storefronts are empty, etc.
It's often helpful to try to negotiate one or two points that you don't really care that much for. This allows you to give up the things that don't matter much to you and improve your chances of getting the things really do matter.
Negotiating can be difficult. If you are not an outgoing type, consider getting someone else to handle the face-to-face. Also, don't get so attached to a space that you end up agreeing to ruinous terms. Keep focused on your goals and be prepared to walk away from the space, if necessary.
If there are two spaces in different centers that would do equally as well, consider negotiating both leases at the same time and play each landlord off the other. "Well, so-and-so has offered 3 months free rent."
Once you and your prospective landlord have reached a verbal agreement, it's time to draw up a lease. The landlord will probably have a template lease that he or she likes to use. It's usually easier to start with that lease than to try and draw up one of your own. Below are some items that landlords like to throw in that you should watch out for:
- If the lease states that you are responsible for any ongoing repairs or equipment replacement, make sure you include a yearly cap on these amounts (e.g., $500/year for HVAC repairs).
- If you are required to pay CAM, make sure you include a cap on the amount that the CAM charge can be raised each year and make sure the lease requires the landlord to give you an itemized accounting of those CAM charges.
If the lease doesn't seem straightforward or you're not great at deciphering legal language, you may want to get a lawyer to look it over for you. If you go this route, tell the lawyer that what you are looking for is to have the lease explained in plain English and for him/her to point out any non-standard clauses. Remember, though, that you are the one who should be making the final decisions, not your lawyer.
Best of luck in finding your space and negotiating favorable terms!
If you have any questions about the lease negotiation process, please email me at firstname.lastname@example.org or post your query to
BookThink Open Shop book forum and I'll do my best to help.
Stay tuned for my next article on Store Layout.