10 Essential Lease Traps & Tips for Small Business Owners

Banking and Financial Institutions

By Banking and Financial Institutions

You’ve made up your mind, you’re going to take the plunge. You’ve crunched the numbers, lined up staff, and found the perfect location to open your own small business. You meet with the landlord, negotiate rent, and move in… life is good.

Minutes after making your first sale, you notice the ceiling is leaking in aisle 2 over the new cashmere sweaters, the A/C stops working on the first 95 degree day of the year and your selection of artisan cheeses is about to spoil, and you just received notice from a bank that they are foreclosing on your landlord and you need to be moved out in 10 days! As a small business owner, you know these things happen everyday. The key is to recognize these concerns before you sign the lease and to plan accordingly – not only will this approach give you protection, it will force you to understand what exactly you’re getting your burgeoning company into.

This 10 part series will start at the beginning and walk you through some of the most important, and often overlooked, aspects of a lease agreement for the small business owner. Whether you’re opening a restaurant, selling high fashion, or just working from cubicles, all of these lease issues must be addressed for your small business to thrive:

  1. What are you really paying for? – Triple Net, Gross, and Modified Gross Leases.
  2. How long should you stay? – Lease Term, Renewal Options, Lease Purchase Options.
  3. What is the landlord going to fix? Landlord’s Duty to Repair.
  4. Who’s on the hook for the lease? Personal Guaranty.
  5. Making the space right for your business. Tenant Improvement  Allowance.
  6. The best neighbors are those you aren’t competing against. Exclusive Use Clauses.
  7. Will the city let you do what you want to do and where you want to do it?
    Intended Use & Zoning.
  8. The building burned, flooded, and the city wants to take my leased space to put in a coffee house. Casualty Loss, Insurance, and Eminent Domain.
  9. Does my landlord really get to hold onto my security deposit forever? Security Deposits and Sunset Clauses.
  10. Bank foreclosure on your landlord. SNDAs.

One Response to “10 Essential Lease Traps & Tips for Small Business Owners”

  1. Michelle Golden on July 25, 2009 5:06 pm

    James, congrats on your posting being featured as BAMSL’s YLD “link of the week.” That’s really cool. Looking forward to the rest of this series…good stuff.

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