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How to Negotiate a Lease -- A Beginner's Guide for Retailers

December 11, 2013
URL: http://www.entrepreneur.com/article/228003

In the fifth edition of his book Retail in Detail, retail business owner and consultant Ronald L. Bond offers small-business owners an updated, no-nonsense guide to the world of retailing. In this edited excerpt, the author offers expert advice on the ins and outs of leases and how to get just what you want in your retail lease.

Negotiating a lease can be as simple as buying a toothbrush or as complicated as buying a new car. Obviously, it's simpler if you're dealing with an individual owner who's very flexible or a large corporation whose policies allow for no negotiations. But we'll assume you'll be dealing with a leasing agent or shopping center manager and that there will be some room for negotiation, as is usually the case.

Leases for retail space usually have a minimum term of three years. The following are usually included in retail space leases, in various combinations.

As the first step in lease negotiations, contact leasing agents regarding spaces in which you're interested and ask for proposals. After receiving several, you should have an idea of the menu of terms and prices you'll have to deal with in your negotiations. At this point, you may find it desirable to engage a leasing agent to negotiate the lease for you, if you feel overwhelmed by the task or if you're not a particularly good negotiator. You can do it yourself, however, and by following some basic guidelines, you should be able to achieve reasonable terms.

It will help if you can locate at least two spaces that meet your needs, thus ensuring competition for your lease. After you receive the proposals from the leasing agents or center managers, don't let them pressure you into signing a lease prematurely.

You should have an attorney review your lease, but don't let him or her make decisions for you. Attorneys are paid to point out potential risks, and they may be overly cautious to make sure you don't later blame them for failing to warn you properly. Listen to the attorney's advice, but make your own business decisions.

Prepare and submit a counter-offer, in writing, in response to the proposals. Some proposals you might consider including are:

Include several or all of these in your proposal. You're unlikely to succeed with them all, but it will establish a good position from which to negotiate and help you evaluate the willingness of the lessors to engage in meaningful negotiations. Make sure the lessors are aware that you're negotiating with other centers.

After you feel you've gotten all the concessions you can get, choose the one that's to your best advantage and finalize the terms.