When renting a commercial business space, many companies look at the basic rent and miss the sneaky costs that can affect their total expenses. These hidden charges can pile up fast, cutting into your earnings and making it tough to keep your finances healthy. To ensure the long-term sustainability of your business, you need to know about these possible hidden costs in commercial leases so you can avoid any money-related shocks later on.
This guide covers the usual hidden costs in business property leases, why it’s crucial to review leases, and ways to haggle lease terms to cut down on these surprise expenses.
Common hidden costs in commercial property leases
- Upfront Costs: Besides the base rent, you’ll often face other costs when you lease commercial property. These can include stamp duty land tax, rent deposit, service charge and building insurance in advance
- Maintenance and Repairs: In a commercial lease, it often falls on the tenant to keep the building maintained and in repair. Unless otherwise negotiated.
- Utilities and Ongoing Expenses: Utilities like electricity, water, and gas can cost commercial tenants a lot. You might also face hidden costs for waste management and other day-to-day expenses.
- Common Areas and Shared Facilities: If the commercial property has shared amenities or common areas, you might need to pay part of the upkeep and running costs for these spaces, via a service charge.
- Business Rates: Business rates are payable on commercial properties. These rates change depending on the size, location and use of the property and also size of your business.
Why it’s essential to review a lease
Before you sign a commercial property lease, you need to closely examine the agreement. This means reading through the lease terms spotting any hidden costs, and working out better terms to protect your business. By reviewing the lease in detail, you can spot potential problems and avoid surprises from unexpected expenses.
Initial expenses to think about when renting commercial space
When you rent commercial space, you’ll face several upfront costs on top of the base rent. These might include:
- Security deposits: Property owners ask for a security deposit often equal to one or more months’ rent, to cover possible damages or unpaid rent.
- Rent in advance: Many property owners want tenants to pay the first quarters rent in advance, which adds a big financial load when starting the lease. This also depends what incentives are negotiated.
- Tenant improvements: If the commercial space needs renovations or changes to fit your business needs, you might have to pay for these improvements.
Hidden costs related to maintenance and repairs
Maintenance and repair costs can become a big hidden expense in commercial property leases. The landlord might handle certain maintenance tasks, but you, as the tenant, may have to cover many hidden costs. These can include:
- HVAC system upkeep and fixes
- Roof and building exterior care
- Lift maintenance and servicing
- Car parking and landscape management
- Shared facility upkeep (e.g. lobbies and common areas)
- Security systems.
You need to read the lease terms to understand your duties regarding upkeep and fixes, and to negotiate a fair split of these costs.
Utilities and other ongoing expenses in commercial leases
Ongoing costs like utilities can eat up a lot of your company’s money. Some hidden expenses in this group might include:
- Bills for electricity, water, and gas
- Fees for waste pickup and recycling
- Costs for property insurance
- Expenses for cleaning
- Charges for keeping security systems and alarms running
Make sure you read the lease to understand which of these regular costs are part of your base rent and which ones you’ll need to pay for as the renter.
Surprise expenses linked to shared spaces and common areas
If the business property has shared services or common areas, you might have to pay for some of the upkeep and running costs of these spaces. These unexpected expenses can include:
- Fixing up and repairing shared spaces (like lobbies, hallways, bathrooms)
- Power, water, and cleaning for areas everyone uses
- Keeping common areas safe and controlling who gets in
- Taking care of the outdoor areas everyone shares, including grass and snow
Know what you’re responsible for using and keeping up these shared spaces so you don’t get hit with surprise costs.
How business rates affect what you pay for your lease
Business rates are like property taxes that people renting commercial spaces often have to pay. These rates can be very different depending on where the property is and how big it is, and they can change how much you end up paying overall. When you are figuring out how much it’ll cost to rent a commercial property, it’s crucial to include these business rates in your calculations.
Negotiating lease terms to avoid hidden expenses
When you’re working out a deal for a commercial property lease, it’s key to take a close look at the terms and spot any costs that might be lurking in the shadows. Here are some tactics to think about:
- Negotiate Lease Terms: Talk to the landlord to get better lease terms that reduce unexpected costs. Try to limit the operating expenses you’ll pay or get the landlord to handle some maintenance and repairs.
- Obtain Detailed Cost Estimates: Ask for specific cost breakdowns for utilities, upkeep, and other regular expenses tied to the property. This will give you a clear picture of the real cost of leasing the space and help you negotiate better.
- Seek Transparency: Push for clear easy-to-understand lease terms that spell out what the landlord and tenant are each responsible for when it comes to maintenance, repairs, and costs for shared facilities.
- Use Competing Offers: When you have several commercial property choices, use the rival offers to bargain for better lease terms and cut down on hidden expenses.
- Get Expert Help: Think about teaming up with a commercial leasing expert to check the lease contract and spot possible hidden costs or unfair conditions.
To make sure you avoid hidden expenses when renting a business space, consider teaming up with a trusted commercial property expert. At The Lease Negotiator we can share helpful tips and steer you through the rental process helping you bargain for the best deal and look out for your company’s interests.
How to avoid surprise costs when renting business space
Renting a business property can get tricky and expensive, but if you know and tackle the possible surprise costs, you can make smarter choices and keep your company’s money safe. Keep these points in mind:
- Review the lease agreement to spot any hidden costs.
- Consider all the upfront costs, like security deposits, rent in advance, and fees for legal paperwork.
- Know what you’re responsible for when it comes to the upkeep, fixes, and costs for shared spaces.
- Look at how utilities and other regular expenses will affect your total leasing costs.
- Work out lease terms that cut down on hidden costs and make everything clear.
- Talk to experts such as people who know a lot about commercial real estate or lawyers, to make sure you’re making the best choice possible.
By using these pointers and taking action in your approach to renting commercial property, you can steer clear of surprise expenses and zero in on expanding your company in a place that fits your requirements and wallet.
We know that dealing with a commercial lease can be complicated, not to mention time-consuming. At The Lease Negotiator we can take it off your hands; not only do we help source commercial properties for businesses, but we also negotiate lease terms and renewal of leases. Additionally, we deal with early exits and rent negotiations, saving the stress and your valuable time, contact us today to find out more about how we help business owners like you.
