Negotiate Your Lease the RIGHT WAY & Save Money

The 1st thing you have to do is set your business up as an PTY LTD Company (or other limited liability company).

The reason is, you don’t want your landlord or anyone else coming after you personally if you weren’t able to pay your bills or had to close up shop (which should never happen, but you need to do it anyway). Plus, a company will help protect you if a client were to sue you for damages, etc.

When you set up a corporation like an PTY LTD company, you are typically shielded from having your personal assets taken to pay any outstanding debts.

The 2nd thing to do is look at multiple locations and available spaces.

You want to do this since you can then pin the landlords against each other when trying to negotiate a lower monthly lease term. (see my post on “merchant accounts” for more on negotiating tactics – it’s basically the same technique)

After you have the numbers from 3-5 spaces start initial negotiating with landlords.

Here’s what I did and you should try to get:

• 3 months free rent while you build out

• Tenant Improvement money (TI) – this is where a landlord pays for the build out or puts money towards the expense of you building your space. It does not include your equipment purchases.

• Ramped up rent (my landlord would not budge on rent, so what I did was say that I would eventually pay what he wants in year 3, but for the 1st 2 years they would be $300 less per month (year 1) and $200 less per month (year 2) and then in year 3 he would get his full amount.

• Negotiate a 3 year lease with a 5 year option (your option). This means you are locked in for 3 years – it’s good because you (and your clients) need to know where you’ll be 1 year or 2 from now. The 5 year option allows you to already have your terms laid out if you decide to renew – this is also a good thing because if you don’t have an option and your landlord sees that you’re training a lot of clients and spent a lot on the build out he’ll try to jack up your rent (not cool!). Plus, after 3 years you can always get out of it if you want a larger space or decide to move locations

• Also, be sure to make everything contingent upon an inspection of the HVAC (heating/AC) equipment and the building structure. You can also negotiate that if those items break the landlord must fix them at his expense.

I hope these tips help and they should save you some aggravation down the road if they’re done right the first time.