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Commercial real estate involves negotiations

On Behalf of | Jul 1, 2019 | Real Estate Law

Finding the right commercial space in an ideal location is an important part of owning a business in Illinois. However, securing that perfect space is often more complicated than it appears. Business owners need to understand how to negotiate a lease when dealing with commercial real estate in order to secure a favorable outcome.

Unlike residential leases, commercial leases usually have much more leeway when it comes to the terms of the agreement. Negotiating over those terms is usually a given, but a business owner may find that the property owner’s situation can affect the outcome. For example, if a property owner has a mostly vacant building or business park, he or she could be more willing to make allowances. A property owner that has a recently vacated premium space or who is located in a hot rental market may have more control over where the negotiations lead.

Tenants should be sure to address both rent and potential rent increases during those negotiations. Illinois property owners should also make clear what kind of lease is involved, such as gross lease or net lease. In a gross lease, the landlord will pay for insurance, repairs, taxes and utilities. Tenants must pay for both the rent and the aforementioned costs in a net lease. Gross leases usually yield higher rents than net leases.

Other important factors to address during negotiations include the lease length, permitted use and necessary improvements and renovations. Even for the most savvy business owner, negotiating a commercial real estate lease can be an overwhelming experience. Many worry that they will forget to talk about various topics, which can result in an unfavorable outcome. Because of this, a business owner may find that working with an experienced lawyer can lead to the best possible lease for his or her unique situation.