Questions to Ask Before Signing a Real Estate Lease

Before you sign a real estate lease, investigate the landlord – his or her reputation for good management, fairness and financial condition. Also, speak to other tenants to determine how happy they are with the building, its location, their leases, and the landlord.

The questions to ask:

• Will the lease be on a “gross” basis (the landlord pays for taxes, utilities, insurance, etc.) or a “net” basis (the tenant pays for these expenses)?
• What is the rentable versus the usable space? i.e., the square footage you will be paying for but not using?
• Who will pay for alterations and repairs prior to moving in? They will be your responsibility if the lease specifies acceptance of the property as is.
• Is there a renewal option? For how long and at what rate and terms?
• Do you have the right to purchase the facilities? If so, at what time and on what terms?
• Can you get out of the lease? If so, how much written notice is required? Penalties?
• Do you have the right to sublease the property or assign the lease agreement to another party?
• Are there step-up provisions in the rental amount? If so, how often and how much?
• Are security deposits held in an interest bearing account?
• Can you use the property for any purpose or is it restricted? For example, are there any non-manufacturing and non-disturbance clauses in the lease?
• Could existing or planned building code, zoning, or infrastructure changes restrict your ability to operate and expand?
• Is there adequate parking for you, your employees and your customers? Free or for an extra fee?
• If you can’t use the premises because of damage or a disaster, do you have to continue paying rent?

The above items are negotiable and they will materially impact you during the full term of the lease. Invest the same care in negotiating a lease as in negotiating any other business agreement. Know all your options and costs.