• The major reason for a brand new entrepreneur to lease rather than to own property is that you do not tie up capital which you could otherwise use for other needs.
• It’s easier to move into a new location if the business is successful and has to expand.
• Check out your prospective landlord. As a small business entrepreneur, you may have to deal with a landlord who is not an individual, but rather a property management firm or investors’ association, represented by a manager, director or lawyer. Such a situation establishes a power balance that rarely tilts in your favor as a tenant.
• Quite a few companies interpret their responsibilities and duties literally. They may not provide enough parking space, may not furnish all the services and utilities they are supposed to, may not repair the air conditioning or heating systems, may be casual about window cleaning and snow removal and much more.
• Find out which companies you can trust with good reputations. Check for references with the Better Business Bureau and the Chamber of Commerce. Don’t forget to talk to the tenants in the complex or mall where you would like to move.
• You may find an opportunity to sublease a space from a current tenant, which may give you more leverage in the negotiations. If you do, be sure you understand the requirements for landlord approval of the sublease.
• Check out the site. Find out who the other tenants in the property are and what they sell. Do those tenants complement the business you want to be in, detract from it or compete with it? What is the pedestrian and vehicle traffic at the site like? How is parking and security? Is the property clean and neat? Is it the sort of place you and the people you hope to attract would visit? Is the location convenient for both your anticipated customers as well as your major suppliers?
• Once you have made a site selection, your actual bargaining position will be relatively weak. In most cases, you will be presented with a printed contract prepared by the lessor's lawyers. Obviously, the terms will favor the lessor. Yet, if he does have some vacancies or is relatively new in the market, you may have some leverage on a few key clauses. Concentrate on the ones you consider most crucial to your business. When possible, let your lawyer do the talking for you.

Characteristics of an Ideal Lease
The following summary of an ideal lease, from your point of view, should help you better identify those provisions that are in your best interest. Try to come as close as possible with your actual lease.

• The facilities you are leasing are in excellent condition, that is, almost new and well maintained. They provide just the type of space you need.
• Your contract lists clearly all the common areas that you are entitled to use, such as number of parking spaces, driveways, loading docks, hallways, elevators, storage areas and waste space.
• Your contract is based on fixed, flat amount rental payments.
• No security deposit is required.
• The rent is at least equal to, if not lower than, comparable space in a similar location.
• You have a short-term lease (up to two years) with the option to renew, without clauses that stipulate periodic rent increases.
• The lessor does not object to alterations you consider necessary. He allows you to remove any improvements upon your leaving.
• The lessor is responsible for maintenance, repairs, utilities, taxes and insurance.
• You can use the space for any lawful purpose.
• You can sublet or assign the lease to someone else without prior permission.
• There are minimal or no restrictions on your promotional activities.
• The lessor won’t lease to direct competitors of yours, at least not the ones that are economically stronger than you.
• There is a contingency clause allowing you to cancel the lease if the premises are substantially damaged by fire or other events, or if your business is less successful than you initially anticipated.
• If your business is a corporation, you do not have to sign a personal guaranty.

Remember, these are only guidelines. You will have to consider what is most important to your business then hold the line on those things in your negotiations.

The Shopping Center Lease
If it takes a fight to get a favorable lease in general, it takes a war to get a good shopping center lease. Only major stores or chains have the power to negotiate. On the other hand, you might want to give it a try, particularly in those cases where you can appeal to common sense and fair play.

For example, imagine that you want to move into a specific shopping center because you think the national department store already there will generate millions of customers who have to pass your location. In this case you should shoot for a provision that allows you to terminate your obligations if the big stores close down there. If it is a new shopping center, reach an agreement saying that you are not obligated to begin business or pay rent until the major tenants have opened their stores.

You may want to have your opening coincide with the start of your best selling season. This way your income is high during the first weeks of your operation.

If the center has not been built, ask for a site plan to be part of your lease. You should make sure that the space and size of the location you initially selected cannot be changed or rearranged without your consent. Also, make sure that other changes that might be made will not interfere with visibility and/or access to your location.

Be sure that the landlord has not reserved the right to relocate your business, especially if you need to count on the traffic flow you will have at the spot you selected.

Besides those points, one of the most crucial factors is the type of payments you have agreed on. Generally, there are four different methods or ways of paying rent:

• The flat rental payment. Your monthly or yearly payment remains the same over the entire lease term.
• Periodic increases in payment. The period is usually defined as one year. Make sure you understand, and agree to, the basis for increases.
• The net lease. You pay not only the basic rent as stated in your contract, but also taxes, insurance, repairs, and so on. Obviously, under such an agreement you -- instead of the lessor -- bear the risk of substantial cost increases and of not knowing what the real cost and/or benefits of the lease are.
• The percentage lease. This method is tricky in terms of financial planning and cost control. Generally, a percentage lease specifies a minimum amount the lessor is entitled to, regardless of how well you do. This is called base rent. In addition, you have to pay a percentage of your gross sales. If you are forced into such an agreement, you should see that the percentage clause takes effect only on sales over a relatively high amount. You should also see that there is a cap on the amount that has to be paid under the percentage clause.

Improvements and Repairs
As you may have gathered, improvements, repairs and maintenance may rarely be bargaining chips at your disposal. On the other hand, if you are responsible for most of those items, you would want a lease that spells out your responsibilities in detail. You don't want to carry one ounce more than necessary. Therefore, your lease should address:

• What condition will the premises be in when you start your business?
• What repairs will the landlord make to the premises before the lease begins and you have to start paying rent? Be sure to reserve the right to make the repairs yourself and reduce the rent if the landlord does not make the repairs.
• At what times and to what extent, if at all, will the lessor provide promotional support for your business?
• Must your improvements and the contractors you select for maintenance be approved by the landlord?
• Who takes care of the common areas?
• Who takes care of the structure and the exterior of the building?
• Who takes care of repairs and reconstruction due to weather, fire, earthquakes, riots, etc.?
• Can you recover your investments for improvements?

If you need consent and approval from the lessor for a number of items, he should be required to defend his decisions reasonably.

Options to Renew
An option to renew a lease is especially desirable if you are somewhat uncertain about your business. Under an option clause, you may extend your lease beyond the initial term, but you don't have to.

• Such a lease will specify how far in advance you must declare your intentions. If your original lease covers three years, you might want to reserve rights for an additional three or four 3-year terms. In accordance with the notice requirement of the lease, generally, ninety days before each period, you let the lessor know whether or not you want to stay, that is, whether or not you want to take advantage of your option.
• Beware. If you toy with the thought of covering several more years by renewal options, the other party will insist on periodically increasing the rent. An option is not an automatic tool to beat inflation.
• Rent adjustments are usually part of the option clause and thus spelled out in advance. This way, you have a sound basis for calculating your cost. However, if you are in a negotiating position on this item, you might want to provide that the rent will be increased only at the time of each renewal.
• Stay clear of any provision that says the rent will be renegotiated at the beginning of each renewal period. Most often an appropriate, mutually satisfying agreement cannot be reached then. Matters wind up in court. There, the judge will listen to expert testimony to determine a reasonable rent. Such a solution is time consuming and costly, to say the least.
• If you and the landlord cannot agree to the rent up front, try to get a clause that allows for mediation or arbitration on that issue since that will be faster and cheaper.