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Concessions are an important part of your business lease

On Behalf of | Feb 16, 2018 | Real Estate Law |

When it comes to finding office space, many new business owners think that the hard part is over when they finally find a property that will work for them and their needs. Doing so is often only half the battle, though. Negotiating the terms of a lease agreement, and the concessions that you may ask to be included in it, can be just as hard.

Concessions that may be included in a lease can greatly benefit a business. Take for example tenant improvement allowances (TIA). When this type of concession is written into a lease, it can give the business owner (tenant) access to funds to either build out or renovate their rented space so that it better meets their needs.

TIAs are used for any range of repairs from simple cosmetic ones to full overhauls of a space. A landlord often tabulates their offer amount based on a combination square feet and property market values. He or she then pays it out as a lump sum. Once paid, any repairs that exceed their conceded amount become the responsibility of the tenant.

Another common concession included in business leases is abated rent, or free rent, that is offered up during the first few months of a lease. This concession is seen as a way to help tenants defer costs associated with moving, renovating, buying furniture when first taking possession of a space.

Abated rent is often a concession landlords agree to as an alternative to having their space remain vacant. When such as concession is made, tenants often end up paying more per month than they otherwise would had such a consideration not been in place.

The third most common type of concession found in business leases is a reduced escalation clause.

Typical leases allow for rent to increase after certain periods of time have passed, whether every few months or each year. As yet another ploy to attract tenants, landlords will often agree to cap such increases. In other instances, they may do away with escalations altogether once a tenant has occupied the property for at least two years.

If you think that you’ve found the ideal office space for your business, then you may benefit from having a St. George real estate law attorney provide you with guidance in the contract negotiation process.