When you enter into a lease agreement for business premises, you need to ensure you can afford it. It will be one of your biggest expenditures, and it may be impossible to make up profit lost due to poor calculations.
Commercial properties can end up costing you more than you think if you do not ensure you understand everything in the contract before signing.
Watch out for these hidden costs
Any of these five things below could push your lease out of your price range and harm your business’s profitability:
- Extra costs on top of the basic rent: Landlords price things in different ways. Some may charge you extra for water and electricity, security, maintenance or repairs.
- Commission: If you rent premises in a commercial mall, the contract may stipulate you pay a percentage of profits on top of other costs.
- Taxes: Be sure you understand whether the prices include tax or not.
- Rent increases: Tying a landlord down to a specific percentage or amount increase at pre-defined intervals allows you to budget ahead. For instance, a 2% increase once a year. Some landlords may prefer other methods, especially if the price includes services, as they may want to pass those increases on to you and raise the amount they gain.
- Your deposit: This is typically a sizeable chunk of money. Make sure you understand what reasons the landlord could give for retaining some or all of it before signing.
Commercial lease contracts can be complex. Remember, you have the right to negotiate or ask for changes in the details before signing. Getting legal help will increase the chance your premises will turn out to be a good investment for your business.