BusinessTN

Renting office space. It’s a necessary step for any small business owner with plans for growth and success. You look at a couple places, get a few rental rate quotes, and pick the one with the lowest rent. Easy, right?

Wrong.

Though rental rates are obviously an important factor when it comes to renting office space, it’s only one of the myriad things that small business owners should be concerned with before they sign on the dotted line.

“People are often surprised at the kinds of issues they have to address,” says Eugene Bernstein, Memphis-based commercial real estate attorney at Wyatt, Tarrant and Combs. “Some think that if they lease office space, they just pay rent and that’s it. When in fact, often rental rates don’t include things like real estate taxes and any other expenses that the landlord might want to pass onto the tenant.”

Other provisions in the lease may include things like common area maintenance, says James Davey, a commercial real estate attorney with Chattanooga’s Shumacker Witt Gaither & Whitaker. How much will the landlord charge for janitorial services or parking lot and lobby maintenance? And how and when will those charges increase? Will the landlord cover the cost of any necessary alterations—such as building walls or installing carpet—to the space?

And if so, how much?

The lease should cover how and when the tenant is allowed to use any common areas or parking spaces, Davey says. It may also spell out what type of liability insurance the tenant must have or whether or not a tenant can sublease the space. Some leases prohibit pets, while others demand a specific type of signage, he says.

And not all landlords even calculate rent the same way, Bernstein cautions. “Is it a ‘leasable foot’ or an actual foot, and does it include an applicable share of the common area?” All things to think about when comparing rates.

“A landlord that charges $13 per square foot might seem cheaper than another who charges $15 per square foot, but that might not necessarily be the case if the former passes on the cost of utilities to his or her tenants, while the latter does not,” he says. “There’s much more to leasing an office space than location and rent,” agrees Roger Moore, president of Knoxville-based R.M. Moore Real Estate. “If you haven’t been through the process before, it can be overwhelming.”

Most of the points in the lease are negotiable, but because commercial leases are often full of complicated legal jargon, it’s usually a good idea to get some help navigating it. Often, landlords use a standard lease on all their office spaces, whether the unit is 10,000 square feet or 3,000. And that lease is often “skewed toward the landlord’s favor,” says David Koziak, a broker with Nashville’s Grubb & Ellis | Centennial. “You need to get someone that can help you balance the lease so that the language is agreeable—one that is profitable to the landlord without being disruptive to the business owner.”

While tenant representative brokers, with their expertise in current market value, are useful in helping a business owner find an appropriate space for a reasonable price, a commercial real estate lawyer is often needed to help fine tune the specifics of the lease, especially with lengthier, more complicated leases.

“There have been times when I had to color-code the lease, just to figure out all the parts,” says Bernstein, who is also the chairman of his firm’s small business practice group. “And I’ve been doing this for 25 years.”

Davey agrees that some leases are indeed complicated, but in the end, he says, all leases come down to this: “Landlords will try to make the language as loose as possible, while the tenant wants to tighten it up as much as possible.”

And the key to successfully negotiating a lease is specificity. If business owners specifically outline as much as possible on the front end, it decreases their chances of being hit with unexpected fees afterward.

For example, Bernstein says, if in a lease a landlord promises to install new carpet and a business owner signs the lease without explicitly agreeing on the type or price of the carpet, the landlord can offer to upgrade the quality of the carpet without being held financially responsible—a situation that can prove disastrous for a new company with a strict startup budget.

And while it is possible to lease an office space without help from professionals, one must keep in mind that landlords are very familiar with the process and can often work things into the negotiation without the tenant even knowing it. Working with a lawyer, or at the very least a broker, can help head off a lot of unnecessary problems, preventing you from having to comb through the fine print of a complicated lease agreement and leaving you more time to concentrate on other business matters. feedback: byrd@businesstn.com