Most of us health & wellness professionals conduct business in person. We treat PT clients in a clinic, coach yoga or Pilates students in a studio, or train people in a gym. Unless you build a home-based business (which is possible, for the record!), you need a local brick-and-mortar space. 

And getting that physical location usually requires signing a commercial lease. So, how do you make sure you get the best deal? How do you know what your rent covers and what you need to manage yourself?

The answers depend on the specifics of the contract you negotiate. So let’s talk about how to advocate for yourself and get the best possible deal when you negotiate a commercial lease.

Commercial lease negotiation tip #1: Set reasonable expectations

Technically, your landlord is an “adversary” during lease negotiations. You want to secure the best deal for yourself, and they want the same thing. 

But the reality is that compromise is crucial to secure any deal at all. You need to find a solution that everyone can agree to. It probably won’t feel like a complete “win” for either side — that’s why you need to approach the negotiation with realistic expectations.

Are you going to get all the perks you want at a super-low cost? No. Is your landlord going to get to charge you a really high rent without providing you with benefits that have meaningful value to you? Also no.

You’ll both have to come to the table with the realistic view that a “win-win” solution will probably feel like a tie at best. And that’s OK — it’s just the way things work.

Commercial lease negotiation tip #2: Understand the basics

Before you start negotiating, it’s important to have a basic understanding of the current market. Having that data will help you set those reasonable expectations we just talked about.

But it’s also important to do a bit of research on the terminology and lingo. You don’t want to start negotiating only to realize that you didn’t understand some of the essential factors in the discussion.

Here are some terms to know:

• Full-service gross lease: This is the simplest setup. Your landlord charges you (the tenant) a set lump sum payment every month. The amount covers the building’s property taxes, services, insurance, maintenance, and possibly utilities (depending on the details of the lease agreement).
• Percentage lease: In this setup, you would pay a base amount for rent plus a percentage of your gross sales. This type of lease is common for retail properties.
• Net lease: In this setup, you would pay a base amount of rent plus specific building-related expenses.
• Single-net lease: This structure isn’t very common, but it means that you would pay a prorated share of the building’s property taxes plus your own utilities and janitorial costs.
• Double-net lease: Sometimes called NN in property listings, this set means you’d pay base rent plus a portion of the property tax and insurance premiums. You’d also cover your utilities and janitorial expenses, but you wouldn’t have to pay CAMs (common area maintenance fees for supplies, maintenance, and repairs of a common-access lobby, restrooms, elevators, and so forth).
• Triple-net lease: You might see this listed as NNN, and it means that you pay base rent plus utilities, janitorial services, and a portion of the property taxes, insurance, and CAMs.

Every type of lease offers pros and cons. For example, A full-service gross lease may seem like the most expensive up front, but you may end up paying more for an NNN lease if your cost utilities, insurance, and property taxes are expensive.

It’s crucial to run the numbers on any potential lease agreement so you know exactly what you’ll be expected to pay.

Commercial lease negotiation tip #3: Get specific

No matter which type of lease you’re negotiating, it’s crucial to include as much detailed information as possible in the contract. For example, once you agree on your percentage of property taxes, make sure that’s in the contract. 

Get into the specifics of insurance, CAMs, property taxes, and every other expense you’ll be expected to pay. There are some expenses, like insurance and taxes, that most landlords won’t be amenable to capping. But other things, like CAMs, janitorial services, or utilities (in a gross lease), you may be able to negotiate a set amount in your contract.

Commercial lease negotiation tip #4: Think ahead

Your plans for your business should factor into your lease negotiations. For example, if you are just starting out and aren’t sure how things will go, you might not want to commit to a long lease. 

Additionally, you should consider interest rates. If prices are high right now, you might not want to commit to a long lease if you think prices might drop in the near future. 

On the other hand, if you’re an established business and you expect to continue running daily operations (or being CEO) of your business for several years to come, a longer lease might be advantageous. 

Finally, don’t forget to think about the longer-term future. Are you interested in creating an exit strategy? Depending on what it is, that might impact the terms of your lease as well. 

Commercial lease negotiation tip #5: Be wary of red flags

Unfortunately, not everyone in the business world will be as honest or forthcoming as you are. Sometimes, holding back certain information for a while can be a valid negotiation tactic. But at some point, you and your potential landlord must enter into an honest, good-faith discussion.

You don’t want to get far into those discussions and realize that your potential landlord is trying to take advantage of you or create a shady deal. It’s better if you can identify some of those red flags at the beginning so you don’t end up wasting time negotiating with someone you don’t want to do business with.

Here are some red flags to watch for:

• Lack of understanding: A landlord who is renting their property as a side gig or who has just entered the market will probably not be as knowledgeable as a professional landlord. Working with someone who doesn’t know their trade extremely well can lead to contract issues and unpleasant negotiations.
• Unreliability: A landlord should be professional and reliable. If they consistently miss appointments or send a secretary or assistant to meet with you instead of showing up themself, it’s probably best to look for someone else.
• Lack of transparency: A potential landlord should take the time to show you the property (in person) and answer all your questions. They should be thorough in all their communications and take the time to understand the specifics you want to discuss during the negotiation.

As hard as it can be in the moment, it’s crucial to pay attention to those warning signs and walk away if things don’t feel right.

Commercial lease negotiation tip #6: Be willing to ask for help

No matter how solid your business plan is, sometimes things go sideways (like when there’s a global pandemic). What should you do if you worry that you might not be able to make your rent?

It might feel a little intimidating, but try reaching out to your landlord. If you have a good contract with a reliable professional, they’ll probably be willing to help to a certain extent. 

If you're a good tenant, it benefits the landlord to keep your lease. So be honest with them and give them some warning if things are looking a little uncertain. They might be willing to work with you if you’ve held up your end of the lease and built a solid relationship with your landlord.

Plan ahead for a successful lease negotiation

Lease negotiations can be stressful and intimidating, especially when you’re just starting out. But as long as you plan ahead and do your research, you can walk into that negotiation feeling prepared.

In the end, it’s just about building a respectful business relationship with your landlord. Look for someone reliable and honest. Be a good tenant, and if things come up, talk to your landlord and try to work out a solution.

Finally, make sure you get all the specifics down in your contract. Not just your lease — all your business’s legal contracts. If you’re not sure which documents you need or how to fill them out, I’ve got you covered with All the Contracts Your Business Needs. This resource kit includes all the essentials to keep your studio covered legally. Get your contract today!