K. Expansion or Purchase Potential

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NEGOTIATE THE BEST LEASE FOR YOUR BUSINESS



Rental Priorities Worksheet for “Terri’s Threads”

Address:



Contact:

Phone #:



Email:



Rent:



Deposit:



Other Fees:

Term:



Date Seen:



Date Available:



Brief description of rental space and building:



Essentials

Yes



No



1. Near residential shopping area, upscale neighborhood, lots of foot traffic.



2. Rent less than $2,000 per month.

3. Minimum 1,000 square feet.

4. Separate employee and customer restrooms.

5. One floor, rectangular, separate storage room(s) in back.

6. Sufficient electrical outlets and capacities to support computers for

inventory and accounts.

7. Available by March 1.



WHAT KIND OF SPACE DO YOU NEED?



1/ 2 5



Rental Priorities Worksheet for “Terri’s Threads” (continued)

Compromise

Yes



No



1. Parking on street or by arrangement in nearby lot.

2. Main interior space divisible into two rooms (one for examining clothing

brought in by consignees).

3. Ability to locate two sets of dressing rooms along opposite walls.

4. Neighboring businesses stay open into early evening at least one day per

week.

5. Landlord willing to lease for 3-5 years and give option to extend longer.

6. Major transportation lines nearby.



Unacceptable

Yes



No



1. Risky crime area.

2. Other consignment shops within a three-mile radius.

3. No lease less than three years.

4. No personal guarantee for the rent.



Notes:



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NEGOTIATE THE BEST LEASE FOR YOUR BUSINESS



There are different ways that you can

assure yourself of the chance to buy a building that you’re renting. In the lease, you and

the landlord can agree that you will have:

• An option to buy the building at a certain date. Tenants usually pay for the

option when they sign the lease, and

sometimes the lease specifies purchase price, too. When the time

comes, you can decide whether you

want to exercise the option (buy the

building).

• A right of first offer. The landlord

promises that if he decides to sell,

he’ll approach you first. You’ll pay for

this option, too.

• A right of first refusal. The landlord

promises that before he sells it to

anyone else, he’ll give you a chance

to meet the terms of the offer he’s

considering (if you can meet them, he

must sell to you). Again, you pay now

for this right.

Purchase options are explained in more

detail in Chapter 14. If you think you want

an option (and are prepared to pay for it),

assign it a value on your worksheet.



L. Preparing Your Rental

Priorities Worksheet

Now, let’s take a look at a sample Rental

Priorities Worksheet. The one just above is

by the owners of Terri’s Threads, a consignment shop for men’s and women’s

clothing. Terri referred to other places in



this book—like the description of how

landlords charge for rent, in Chapter 4—before comfortably noting that she could afford no more than $2,000 for rent. (She

learned, for example, that if she was going

to pay a portion of the building’s operating

costs, the rent could fluctuate, so she listed

the highest amount she could handle,

knowing that the real cost might be lower

at times.)

Terri will make copies of this worksheet

and take one with her every time she visits

potential rental space, filling in the location’s

address and other important information at

the top of the form. In the chapters that follow, we’ll show how Terri uses this

worksheet to evaluate possible rentals.



M. Subleasing Space

Sometimes, the ideal space for your business

may be within someone else’s tenancy. If

you rent space from another tenant, you’re

subleasing from that tenant (and you’re

called the subtenant). As a subtenant, you

rent directly from the tenant, not the landlord, though you must abide by the lease

terms and conditions that the landlord has

set up with the tenant. Chapter 14, Section

F, explains the legal ins and outs of subleasing in detail (and also covers its close

cousin, “assigning”).

You may be able to get a great deal as a

subtenant. That’s because tenants who are

willing to share their space usually need to

do so—their projected requirements for



WHAT KIND OF SPACE DO YOU NEED?



space didn’t pan out as hoped, or their

income is insufficient to cover the rent. As

long as the tenant’s own lease allows it,

subleasing is one way to cut the overhead.

There are, however, downsides to being

a subtenant. For one, since you’re leasing

from a tenant, you’re dealing with someone

who is not in the business of being a landlord and may not know or care about treating a tenant—you—properly and legally.

For instance, you may not find your “landlord” reacting as promptly and conscientiously as you might wish when it comes to

requests for repairs.

If you are considering renting from

another tenant, keep these issues in mind:

• Check to see if the landlord’s consent

is needed for subletting the space or

assigning the lease. If it is, make sure

you’re not legally bound to take the

space until the tenant’s landlord has

consented in writing.

• Look for clauses in the prime lease

(the lease between the landlord and

the original tenant) that require the

landlord’s consent for a use change or

alterations of the space. (Use restrictions are explained in Chapter 7,

Section D.) Don’t sign up unless the

landlord gives the needed approvals,

in writing.

• Scrutinize the tenant’s lease for

charges in addition to rent—passthrough charges, for example, for

maintenance, taxes, and insurance.

Find out if the tenant will be passing

on these costs to you. (Chapter 9, Sec-



1/ 2 7



tion D, explains these additional

forms of rent.)

• Get written confirmation from the

landlord and tenant that the tenant’s

lease is in good standing, and that as

long as you pay your rent and other

required charges, you can continue to

occupy your space.

• Include a clause in your lease allowing you to cancel the sublease if the

landlord fails to provide building

services and repairs. The last thing

you want is to be the unhappy recipient of the fallout from a fractious relationship between the landlord and the

tenant.



Checklist for Determining

Your Space Needs

This chapter will get your space search off

to a great start. It should help you:

• determine that you really need to

move

• know the maximum rent and deposit

you can afford to pay

• identify the ideal location, size, physical features, and services of the property you want

• decide how long a lease you need,

and

• prepare a Rental Priorities Worksheet,

including features of the rental or

lease that you can’t abide (absolute

no-ways).



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