Ideas and techniques for negotiating commercial lease contracts
Are you looking to lease space in a commercial centre, but the lease contract the landlord sent you sounds more like a Faustian pact? Do you have the feeling the contract places all the responsibilities on you, while assigning you no rights? Check out the following 10 ideas and techniques to negotiate a more balanced contract, based on over 15 years of experience in commercial lease contracts.
- Do not unconditionally wave your legal rights as a tenant – your preferential right to a new contract under equal conditions upon expiry of the original agreement (yes, this applies to commercial leases, too, not just to residential), the right to invoke hardship with a view to renegotiating the rental costs under certain circumstances, etc. Use these rights as negotiation leverage in order to obtain concessions from the landlord – a longer period grace period from rent payment, additional fit-out contribution by the landlord, etc.
- Set out extremely clearly (possibly in an addendum to the contract) the maintenance and repair obligations incumbent on the landlord, with maximum completion deadlines and exemptions from rent payment in the event of restrictions to/loss of use of the space during the period in which repairs are being carried out (above a reasonable threshold).
- Reserve the right to withdraw unilaterally from the contract at a given moment, with reasonable prior notice and without any penalties, and make sure that the landlord is not allowed, at the moment of withdrawal, to request the restitution (in full or pro rata) of their fit-out contribution.
- Insist that the contract includes a clause giving you an exit right in the event that the tenant mix in the commercial centre at the time of signing the contract (this could refer to the presence of a hypermarket, a DYI store, an international fast food chain, etc.) changes and the initial anchor tenant is not replaced within a reasonable time.
- Ask for a proportional reduction in the rent case the of occupancy rate of the commercial centre falls below a certain percentage and this situation is not rectified within a certain period of time.
- Do not agree to be relocated within the commercial centre at the discretion of the landlord, unless the new space provided is similar in terms of surface area, attractiveness to customers and accessibly, and unless the cost of all the logistics relating to the relocation is covered by the landlord; you should also request compensation for any period in which sales were affected by the relocation.
- Negotiate a maximum threshold for increases to any shared costs you pay in advance based on the landlord’s estimations and pending an annual reconciliation and stipulate a limit on the annual indexing of rental costs.
- Ensure the contract contains the landlord’s approval allowing you to establish your place of business/registered office in the leased space and that it stipulates that the rental contract will be registered with the land book.
- Include in the lease contract the obligation on the landlord to provide you, within a reasonable amount of time, with all the documents required to obtain the relevant permits for your business to operate in the leased space, as well as all other documents that may be requested by the authorities.
- Where possible, always use the “mirrored” negotiation technique for fines, sanctions, the waiver of rights and the aggravation of responsibilities – all of these should be clear and equal for both parties to the contract.
Finally, and perhaps most importantly, make sure you fully understand all the clauses in the contract before signing it and have the landlord’s lawyers explain any unclear articles, including concrete, practical examples. You might discover that certain contractual provisions have in fact been transplanted directly from the body of Anglo-Saxon common law, and they often end up being rejected by the immune system of Romanian law.
