It’s a tenant’s market when it comes to leasing office, retail and warehouse space in Columbus, but even in the most favorable conditions, a poorly negotiated lease can cost your business money.
“You need to look at the costs that are involved in addition to the basic monthly obligation,” says Dan Minor, partner with Vorys, Sater, Seymour and Pease LLP. “Do your homework and read the lease very carefully to understand what is required of you.”
For example, says Minor, some leases include electricity, but if your usage exceeds a certain amount, you are liable for the difference.
“If you have a lot of computer equipment that needs to stay cool, you can get hit with a high bill in the summer,” says Minor.
Also beware of spaces rented “as is.”
“Make sure the HVAC system is working adequately,” says Minor. “And make sure you know who pays to repair it if it isn’t.”
Minor recommends hiring a building inspector or equipment expert to inspect the premises before you sign the lease.
David G. Baker, partner of Bricker & Eckler LLP’s real estate department, says there’s a lot of space is available for subleasing. That can present a great deal, as long as you are aware of and plan for the risks.
“The main lease might be $15 a square foot, and you can sublease the space for $10 a square foot,” says Baker. “But if the main tenant defaults, you could be evicted.”
Baker recommends adding a nondisturbance agreement to the sublease to protect yourself from that situation.
“It basically says if the main tenant defaults, the landlord agrees not to boot us or hike the rent,” Baker says.
Baker also advises tenants to ask for an option to renew the lease at the end of its term with a cap on how much the rent can increase.
“The landlord will want to raise it to the current market price, but if you plan to remain long term, you can negotiate terms in your favor,” says Baker.
And like Minor, Baker recommends calculating additional lease costs.
“Rent is usually a total of base rent plus a combination of pass-throughs like taxes, insurance and maintenance costs,” Baker says. “If the landlord’s insurance rates go up — and they have been — your rent could increase dramatically.”
Instead, negotiate a gross rate that covers everything and stipulate a cap on pass-throughs.
“You need to be diligent in understanding all the terms of the lease before you sign,” says Minor. How to reach: Vorys, Sater, Seymour and Pease LLP, (614) 464-6400, Bricker & Eckler LLP, (614) 227-2364
