Creative Lease Term Solutions for Startups
As a startup, finding the perfect workspace can be a daunting task. However, leasing a space can be a cost-effective alternative to buying or building a facility. Leasing provides the flexibility to move your business to a new location once the lease is over, and frees up capital to invest in your growing business. However, commercial leases can be complicated - here are some creative lease term solutions to help your startup thrive.
1. Flexible Lease Options
Many startups experience growth and change rapidly, often leading to a need for expansion, different configurations or even downsizing. It is vital to find a space that can accommodate these changes. A flexible lease option is essential in such cases. Flexibility in your lease terms can include options to expand or reduce space, short-term leases, or even earlier termination clauses allowing you to leave early, without incurring penalties. A startup business can benefit from negotiating upfront with landlords to include these flexible lease terms.
2. CAM costs clauses
Common Area Maintenance (CAM) costs refer to expenses related to shared areas of the building, such as lobbies, parking lots, hallways, and elevators. CAM costs can add up, making it essential to ensure you're aware of the amount you're liable for. A CAM clause in the lease agreement defines the tenants' share of CAM costs. CAM clauses must be clear and easy to understand, particularly for startups that don't have extra spending capital.
3. Negotiate Rent Increases
Rent increases are standard in most commercial leases. However, startups should negotiate rent increases to ensure they're not being unfairly charged. One creative solution is to negotiate a fixed increase amount with your landlord, for a specific number of years. This option will not only give budgeting certainty but also allows for needs to adjust and expand before deciding to calculate yet another variable.
4. Rent Abatement
Rent abatement is the temporary reduction or postponement of rent. This clause can be beneficial if your move-in date is delayed, or there are repair works ongoing in the premises. Rent abatement clauses may require that the landlord gets an extension to the lease term, or guarantee that odd hours of access or delivery will gain (which may also reduce rent); it is important to discuss these details early on to maximize your benefit.
5. Negotiating Fit Outs
Negotiating fit-outs with a landlord can benefit startups significantly. The provision by a landlord of some free build-outs or internal improvements can help get you started. This provision makes it easier to personalize your working space and creates a sense of ownership, which is crucial for startups. A tenant improvement allowance clause allows the tenant to decorate and make essential improvements to the workspace without incurring excessive costs.
6. Sublease Options
A sublease option can be a useful clause in a commercial lease agreement that benefits startups, giving them the option to sublease unused portions of space. This valuable opportunity can help cover costs and aid with business expansion. Having a sublease option clause could even bring a tenant a potential business partner and further expand networking opportunities.
In conclusion, leasing a workspace for your startup can provide a level of flexibility and cost saving, allowing for growth and expansion. The key is to know how to negotiate lease terms and include clauses that provide the flexibility required for a fast-paced startup. By considering creative lease term solutions, startups can ensure they're not only saving costs but have space tailored to their specific businesses' needs.