Have you
ever signed a lease for a location you loved that turned out to be a
ulcer-inducing money pit?
Retail
business owners are constantly taking on the burden of searching for their new
locations. No sooner do they identify
the perfect spot than they find themselves in lease negotiations with the landlord. Even if they have signed leases in the past,
they are intimidated by the process because the landlord’s agent and the
landlord obviously have far more experience with leases. They feel presumptuous questioning the
language of the lease; they rationalize that if it has the AIR label at the
top, it must be the standard form that everyone else signs and so they sign
it. My friend Vanessa did. Poor thing…
Vanessa has
a big idea for a casual take-out restaurant in downtown Los Angeles. The agent that showed her this former
restaurant space answered only the questions she asked about the condition of
the premises. She did not have an
experienced advocate to dig any deeper.
She signed the lease and took possession, only to find that the electrical
service was woefully inadequate for her operation. Right after she spent $10,000 for the
necessary upgrades, she learned that the premises had no air conditioning! That will cost her another $7,500. Are we having fun yet?
Could an
agent negotiating on Vanessa’s behalf have gotten the landlord to spend the
$17,500? Maybe not. But with a lease hanging like a carrot on a
stick in front of the landlord, some rent concessions might have been
negotiated using the argument that the tenant was about to perform improvements
that would add lasting value to the landlord’s building. But at
this juncture, Vanessa has zero leverage.
She’s coughing up the dough and it’s coming right out of her marketing
budget.
A good
tenant rep broker could have probably saved her half of those outlays and at no
cost, because commissions to all brokers in the deal are paid by the
landlord. And you can take that to the
bank.
Aaron Weiner, CCIM, CPM, LEED AP
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