Franchise Mama

n my book, Negotiate Your Commercial Lease, I share with you many horror stories of tenants who have learned their lessons the hard way. In today’s commercial real estate market, it is simply far too costly not to use these lessons to your advantage. In this column, I will share with you a few of the lessons that easily could have been avoided.

Lesson One – Don’t wait for the landlord to call you about your upcoming lease renewal. A tenant who had just hired us to negotiate his lease renewal waited until the last month before becoming proactive. Now, he is facing a substantial rental increase from $6.00 per square foot to $11.00 per square foot in addition to Overholding Period Penalty charges. The Overholding Clause can be found in most lease agreements; this anticipates that the tenant may not move out when the term is completed. Essentially, the landlord is saying to the tenant that, should he/she stay in the premises on a month-to-month basis, all previous terms and conditions will still apply; however, the rental rate will double or even triple. Why so? It is expected that market rents will increase after a number of year plus the landlord is essentially penalizing the tenant for staying short-term.

Renewing your lease must be a proactive measure initiated nine to 12 months before your lease agreement expires. Tenants have come to us with days or only weeks left on their lease term only to find out that the landlord will only renew their lease at a much higher rent, or not at all. Whether the news is good or bad, it’s better to find out nine months in advance so you have ample time to make plans to relocate, if necessary.

Lesson Two – Ensure the business terms of the Offer to Lease match the Formal Lease Agreement. A large retail tenant (part of a national chain) signed an Offer to Lease that included several months of free rent. The tenant didn’t have anyone review the landlord’s Formal Lease Agreement and simply signed it. The free rent was left out of the Formal Lease Agreement and the tenant had to fight to get back what he had already won. Don’t assume the two documents will be carbon copies of each other. If you cannot stand the thought of plowing through a 50-page Lease Agreement, have a Certified Lease Consultant do it for you.

Lesson Three – Even if a landlord is being truthful with you, he/she can be wrong. A tenant signed a lease for approximately 4,400 square feet (or so it was thought). When we measured the space for the tenant we discovered that the occupied space was only 3,600 square feet. We fixed the problem for the tenant and recovered over $50,000 in overpaid rent, but what if the space had never been measured? That same tenant today would still be paying rent for an additional 900 square feet he did not have. Watch out for the so-called “phantom space”. Have your space measured and don’t take the landlord’s word for it.

Lesson Four – Don’t assume the landlord has seen or approved the Offer to Lease before you sign it. When tenants hire The Lease Coach often they have received an Offer to Lease from the landlord’s broker and want some advice before responding or signing it. Many business owners have pulled their hair out in frustration after signing the broker’s Offer to Lease only to have the landlord ask for more rent in a counteroffer. I explained that this is what’s called a broker driven deal. The listing broker or agent wants to get your signature on the Offer before he/she presents it to the landlord. If the landlord hasn’t signed the Offer being presented to you, ask the Agent if the landlord has pre approved the deal. If not, there may be no deal at all.

Lesson Five – Get it in writing. A tenant told me that his landlord had agreed to provide him with several additional considerations above and beyond the terms and conditions of the lease agreement. When I inquired with the tenant why he had not insisted on getting these items in writing he could not answer me. If there is something you want added to the Offer to Lease or something you want changed in the Formal Lease Agreement, do not wait for the landlord to change it – pick up a pen and change it yourself. Don’t be afraid or shy and don’t be too nice for your own good. If it’s not in writing, it doesn’t count.

Lesson Six – Don’t assume the franchiser will be doing your site selection and lease negotiations in-house. Don’t get me wrong I’m pro-franchising. Many of our clients are franchisers and many more are franchisees. A franchisee recently hired The Lease Coach to do her site selection and negotiate the lease. Why? Because the franchiser had turned the entire site selection process over to a local broker who was in fact representing the landlord’s best interest. The tenant became suspicious when the only properties she was being shown were the broker’s own listings. No one can serve two masters. You must look out for yourself and that means scrutinizing the advice and counsel you receive.


If there is an article idea relating to commercial leasing that you would like to see on the Franchise Mama website, please notify Rick Lauber, Publicity and Marketing for The Lease Coach. You can reach Rick directly by e-mail to ricklauber@TheLeaseCoach.com.


Dale Willerton is Founder of The Lease Coach®, a network of Certified Commercial Lease Consultants who work exclusively for tenants and franchisees across the US and Canada. For more information, e-mail DaleWillerton@TheLeaseCoach.com, call 1 (800) 738-9202 or visit us at www.TheLeaseCoach.com.