A. Do You Need to Move Now?

WHAT KIND OF SPACE DO YOU NEED?



But while your house or apartment may

work just fine if you have a small office-type

business or are working as a consultant, it

normally won’t meet your space needs if

you’re in a retail or wholesale business that

requires customers or clients to come to

you. Similarly, service businesses—such as

restaurants and repair services—require

commercial space.

If a home business seems right for you,

make sure there are no legal restrictions to

your working at home. In particular, here’s

what to check:

• Local zoning ordinances. These may

restrict the type and amount of traffic,

bar outside signs, prohibit or limit the

number of employees, and set a limit

on the percentage of the floor space

that can be devoted to the business.

Contact the office of your city attorney,

city manager, or mayor for information on zoning ordinances that may

affect your business.

• Deed restrictions in condominiums and

planned unit developments. These

often prohibit commercial activities,

including home businesses. Review

your covenants, conditions, and restrictions (CC & Rs) for details.

• Apartment leases or rental agreements.

These sometimes specify that the

premises may be used for residential

purposes only, or restrict use to

specified businesses, such as family

daycare.

Even if there are no restrictions, a home

business may not work for you personally.



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You might not want customers or business

associates intruding into your family’s space,

and you may be concerned that you’ll have

a hard time putting business aside if it’s as

close as the next room. Many home business

entrepreneurs have a hard time resisting the

attractions (and distractions) of the kitchen,

television, and household chores. And if

you have small children, working at home

may be especially difficult.

Businesses that are run from home may

also need to comply with federal and state

laws regarding access for disabled persons.

(See Chapter 12, Section D, for more on

this issue.)

If you run a home business, you may

need special insurance. Your homeowner’s policy may not apply if you use the

premises—your home—for commercial purposes. This means that even if you merely

have a computer and a file cabinet that you

use to run your home-based business, your

policy may not cover business property that is

destroyed in a fire or other disaster at your home.

Even worse, once you begin using the home

as a place of business, your homeowner’s insurance may not protect you if someone, even a

nonbusiness visitor, is injured at the home. Be

sure to raise these concerns with your insurance

agent or broker, who may suggest that you purchase a commercial policy or a special business

rider to your homeowner’s policy. (Chapter 9,

Section C, explains business insurance issues

for non–home-business outfits in detail.)



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NEGOTIATE THE BEST LEASE FOR YOUR BUSINESS



Resources on Home Businesses

This book focuses primarily on leasing

commercial space. Of course, doing business at home is still a viable option for

many small businesses. Fortunately, there’s

a lot of valuable guidance out there if you

decide that home is where the business

is—and will be for the foreseeable future.

The Legal Guide for Starting & Running a

Small Business, by Fred Steingold (Nolo),

provides helpful information about the legal

issues involved in operating a home-based

business, including how to comply with

zoning ordinances and private land use

restrictions, and getting the right kind of

insurance.

Tax Deductions for Home Businesses, by

Stephen Fishman (Nolo), gives home business owners the information they need to

take advantage of the many tax deductions

available especially for them.

The “business & human resources” section of Nolo’s website at www.nolo.com

has many articles useful to home business

owners, covering starting your business,

business structure, and related topics.

A good starting point on the Web is

www.bizoffice.com, which provides

numerous links to other sites for homebased businesses.



2. Staying in Your Current Rental

Perhaps your business already occupies

commercial space but you feel, for one

reason or another, that it’s time to move.

Maybe you’ve outgrown your current digs

and need more spacious quarters; or you’ve

had your fill of your nickel-and-diming landlord. But first, look closely at whether it is

at all possible to stay put. Moving can be

costly and inconvenient. For one thing, you’ll

need to pack up your furniture and equipment—and maybe your stock of goods, too,

if you have a retail or wholesale business.

Then there’s the cost of hiring a moving

company or at least renting a truck to make

the move. Depending on your business,

you’ll need to change your stationery,

brochures, and advertising; and you may

have to buy new furniture and equipment.

What’s more, you may lose valuable

employees who cannot (or don’t want to)

make the transition to a new area. Your

day-to-day operations will be interrupted

and you may lose customers or clients who

can’t find your new location or feel it’s

inconvenient.

While moving doesn’t present insurmountable obstacles, maybe you can avoid a move

entirely by working with your landlord to

solve problems with your current rental.

Landlords will often do what it takes to

keep a tenant from leaving, because it can

be expensive to carry empty space and

then revamp it for another occupant.



WHAT KIND OF SPACE DO YOU NEED?



So make a list of the problems that make

you want to move and see if they can be

overcome. Here are a few examples:

• Too pricey. If the space is too expensive

or you need less room because of

downsizing your business, the landlord may be willing to let you bring in

a sublet or reconfigure the space.

• The wrong interior look. Sometimes,

space can be vastly improved by

simple improvements such as adding

or removing interior walls or installing

better lighting.

• Insufficient space. If you don’t have

enough space, maybe the landlord will

let you take over an adjoining space

(if it’s empty) or allow you to move to

a larger space within the building—

alternatives that are likely to be

cheaper and less disruptive than

moving to a completely new location.

• Building security or services. If you’re

concerned about intruders or shabbiness, ask the landlord to provide

better security and maintenance.

At least explore these possibilities. You

have nothing to lose by asking your landlord.

Before you charge off to your landlord’s

office, however, take a minute to consider

whether your list of gripes represents truly

important issues for your business. One way

to measure their importance is to compare

your dissatisfactions with what you would

look for in a new rental. In Section B, below,

we suggest ways to organize and rank your

rental priorities. If you go through that exercise and find that the items on the top of



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the list are precisely those that are missing

from your current location, you know it’s

time to act.



3. Buying Instead of Renting

You may want to take a moment to consider whether now is the time to buy instead of rent. Don’t immediately assume

that you can’t afford it—your monthly rent

won’t necessarily be that much less than a

mortgage payment. Here are some advantages of owning commercial property:

• Instead of pouring money down the

drain, you’re making an investment (if

you can afford a down payment, your

monthly payments may be similar to a

rent payment).

• Ownership increases your ability to

get a loan. The Small Business Administration (SBA) likes making loans

secured by real estate.

• If the property appreciates, that will

give you additional capital for the

business in the future (through refinancing).

• As an owner, you have more control

over the space and improvements.

• If you shut down, you can lease or

sell the property.

Before you completely dismiss the idea,

talk with your financial advisors to see if it

makes sense to consider owning commercial space, and do a little research on the

types and costs of available properties.



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NEGOTIATE THE BEST LEASE FOR YOUR BUSINESS



Check Your Current Lease Before You Leap

If you’re currently renting space and plan

to move elsewhere, check your lease first.

Here’s what to look for:

• The exact termination date. Try to

begin your search for new space well

enough in advance so that you won’t

feel rushed. If the termination date is

too far off, however, you may be forced

to begin your new lease before the old

one is over. It’s a delicate balance—

you don’t want to be responsible for a

period of double rents, nor do you

want a gap between lease periods. If

you’re a very desirable tenant in a

tenant’s market, you might be able to

get a new landlord to cover your rent

at your former location.

• The possibility of a buyout. If you

need to move before the current lease

expires, look to see if you can leave

early by paying a “buyout amount.”

This is money that the landlord accepts

in exchange for letting you out of your

lease early.

• Staying longer. If your new space isn’t

ready on time—a common problem—



it would be smart to find out if you

can continue to occupy your current

space after the stated termination date.

You might be able to negotiate a

short-term extension of your current

lease. If the landlord won’t give you

an extension, check to see whether

your lease imposes onerous “holdover” provisions. Landlords typically

charge big rents to tenants who don’t

leave on time. Holdover provisions

are explained further in Chapter 8,

Section D.

• Options and sublets. An option clause

in your current lease could significantly affect your decision and ability

to move. Your lease may give you the

option to renew, and perhaps pick up

additional space as well. If you nevertheless want to move, it may be wise

to investigate whether you can exercise

the option—but instead of using it

yourself, sublet the space at a profit

and move your operation to a new

location. See Chapter 14 for detailed

explanations of options and subletting.



WHAT KIND OF SPACE DO YOU NEED?



B. Setting Your Priorities

If you’re convinced that it really is time to

move, you’ll need to think carefully about

what you need, would like, and won’t

abide. To help you, we’ve developed a list

of features that concern most businesses.

Don’t be constrained by our list—if other

points are important, by all means add

them. Your goal is to end up with a concise

statement—expressed in words (downtown

area) or numbers (maximum $3,000 rent) of

what you must have, would like, and absolutely cannot accept.

As you go through the issues discussed

below, prepare a Rental Priorities Worksheet like the one shown at the end of this

chapter. You may need to refer to other

chapters as you go—for example, if you

need the ability to expand, check out

Chapter 14, Section C, which explains how

tenants secure expansion rights in the

lease. Write your conclusions under one of

the following headings:

• Essentials—essential issues or features

you’re looking for in a rental space,

such as a maximum rent, a specific

location, or minimum square footage.

• Compromise—features that you’d like

but that aren’t crucial to your decision

of whether to rent a particular space,

such as proximity to specific types of

businesses or neighborhoods.

• Unacceptable—features that you absolutely want to avoid, such as lack of

public transportation or the inability to

expand into contiguous space. We

also call these your “no-ways.”



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Our sample Rental Priorities Worksheet

has been filled out to reflect how a particular

business (in this case, a consignment shop)

ranked its requirements for new commercial

space.

Once you have a “master” worksheet,

make copies and take one with you every

time you visit a potential space. At that

point you’ll fill in the rent, address, and

other information on a particular property,

and note how it measures up to your priorities. Chapter 3, Section A, explains how

to use your Rental Priorities Worksheet

when finding and visiting potential rental

space.

Bring your partners and key employees

into the loop. Review your rental

priorities together and make sure you agree on

the basics. Consult with your staff, too—for

example, if your business has specific computer needs, you’ll want input from technical

employees as to what you must look for, accesswise, in a new location. You don’t want to

invest enormous energy in seeking that perfect

business site, only to learn that one of your

business partners or key employees requires

windows that open or space that’s near public

transportation. Similarly, if you feel strongly

that your business should offer on-site parking

to customers, you’ll want to make sure that

important players in the business share this

desire and are willing to pay for it.



The better you know your business, the

easier it will be to describe your ideal

rental. Of course, it will be easier to list the

“must haves” and the “not necessaries” if



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NEGOTIATE THE BEST LEASE FOR YOUR BUSINESS



your business is up and running, smoothly

and profitably, than if you are just starting

out and haven’t tested the market or the

viability of your product or approach. That

said, however, even fledgling enterprises

will benefit from preparing a Rental Priorities

Worksheet, which will force you, at the very

least, to think ahead about the surroundings

and amenities that will help your business

prosper.

As you prepare your list of rental features,

ranking each according to its importance to

your business, remember that your hard work

will translate directly into a more efficient

rental search. Assuming your self-assessment

is realistic (not too many of you should plan

to move into Trump Towers) and focuses

on major issues (like size and rent), you’ll

be able to quickly and accurately zero in

on those rentals that are real possibilities,

saving time and energy for the job that

needs you most—running your business.



C. Rent, Deposits, and

Improvements

The first issues to consider are the most

obvious and, for many of you, the most

important. Figure out the maximum rent

your business can afford to pay per month.

And if the landlord asks you to put down a

security deposit before you move in, think

about whether your reserves can handle a

particularly big hit in the first month. Finally,

consider how much money you can afford

to spend to alter the space to fit your needs

and tastes.



1. Rent

When you lease commercial space, the

monthly rent bill is likely to be more

complicated than the monthly rent for an

apartment or house. That’s because many

landlords charge you not only for square

footage, but also for other regular expenses,

such as real estate taxes, utilities, and insurance. If you rent in a multitenant building,

you’re likely to be asked to pay your share

of common area maintenance, too. If you

rent the entire building, you may be asked

to foot the entire bill for these costs. How

to determine the exact cost of a rental

space is explained in detail in Chapter 4.

For now, understand that your rent figure

may need to be big enough to cover multiple, recurring expenses.

Put a realistic cap on the amount you’re

prepared to pay. A fancy location may feed

your ego—but paying for it can drive you

out of business. The simple truth is that most

small businesses can’t afford Fifth Avenue.

If you are certain that location will bring

fame and fortune, you can always move up

(see Chapter 14 for advice on crafting a

lease that gives you maximum mobility). It

is much harder, let alone disheartening, to

start off in deluxe digs and have to retreat

to humble quarters.



2. Deposits

Many commercial landlords require tenants

to pay one or two months’ rent up front as



WHAT KIND OF SPACE DO YOU NEED?



1/ 1 1



a security deposit, which the landlord will

dip into if the tenant fails to pay the rent or

other sums required by the lease (such as

insurance or maintenance costs). Bear in

mind that the amount of the deposit for

commercial rentals is not regulated by law,

but is instead a matter of negotiation. Landlords tend to demand high deposits from

new or otherwise unproven businesses—

which are often the least able to produce,

and tie up, a large chunk of cash.

If you expect that you’ll be asked for a

high deposit, include in your worksheet the

maximum you can pay up front. Security

deposits (including alternatives to cash

deposits, such as a letter of credit, and

ways to get the deposit returned during the

tenancy) are explained in depth in Chapter

10.



entire bill (which is the next best thing to

finding space that’s perfect already). But for

now, don’t count on it. Instead, think about

the demands of your business and how they

translate into space requirements. Will a

generic office space do quite nicely? If so,

you don’t have to plan on spending much

to fix it up. Or do you have a business with

special needs, such as a veterinarian’s office

that needs special lights, plumbing fixtures,

alternate power sources, and ventilation? If

this describes your situation, you’ll need to

put some resources into readying the space,

even if you find a rental that is appropriate

in every other respect. For purposes of

your Rental Priorities Worksheet, figure out

what it would cost to make usable but

bare-bones space ready for your business

and add that dollar amount to your list.



3. Other Improvements

and Expenses



D. Location



Security deposits aren’t the only up-front

costs that tenants may face during the first

few months of operation in a new location.

Unless you are fortunate enough to find

space that is configured and finished just as

you would like it, you’ll want to modify the

space to fit your needs and tastes. These

modifications are known as your “improvements.”

There are several ways that landlords and

tenants can allocate the cost of improvements

(Chapter 11 describes each in detail). You

might find a landlord willing to foot the



The physical location of your business is

likely to be important to you, your employees, your customers or clients, or your

suppliers. The more people and groups

you need to please, the smaller the number

of possible rentals that will fit the bill. This

section explores some of the considerations

regarding location.



1. Neighborhood and Neighbors

Being in the right part of town and even on

the right street can be an important factor