10 Things To Consider When Co-Leasing

coleasing

While starting a business and at the same time searching for a strategic location in the market you are looking for can be challenging. With the prices of property rising at the turn of each year, you wonder if it is possible to have a wall and brick location for your new business idea or non-profit.

Your business can be so many things but cannot afford to be far away from its intended niche. The more traffic you have, the better chance of turning a profitable venture or a fulfilling non-profit organization. However, for new business owners, a commercial lease is a daunting and herculean undertaking that requires inventive research and diligence.

I currently have the same challenge of getting a sizable location for a non-profit I chair. It dawned on me that I could do a co-lease with another non-profit since most of our programs runs in the evenings and weekend. That was how we got another non-profit to co-lease with us who are also looking for same opportunity. Below are some of the factors I considered;

Term of Lease: Setting up the term and rent is the first factor to consider and your baseline negotiation. Agree on what terms work best for the both parties. At best, you do not want to over-commit to a long-term as it gives you option of getting a better place that will suit your organization in long term. What is the modality of lease payment? Should it based on percentage of Sq. Ft. or equal payments or usage. The both parties have to agree on what is best for them.

Property Broker: To reduce complexity and remove clutters, you want to consider using the same property broker. Always find a way to agree with one another before triaging issues with the broker or property management, so you can have one representation in front of the landlord or owner.

Development: Do any of the tenants want adjustment to the current layout of the property? This development can be basic improvements such as more windows, additional entrance/exit, toilets, storage location or offices. It is best to push-off to the landlord major development while the co-tenants discuss and negotiate on minor developments that suit them both.

City Code: You want to have city approval for your location, number of people, zoning and property. Consult City first. The city council has building codes that will determine if the place can be approved for your intended purpose(s) and any further requirement. Trust me, there is always something.

Maintenance and Repairs– The burden of repairing damages and maintaining the lot can be challenging on both end. I prefer all damage by any of the anchor tenants to be fully borne by tenant responsible. For any indeterminable damages, the property broker can be advised to address before escalating to property owner.

Utility Bills: This can either be borne by property owner or tenants. In most cases, it is the tenants. Thus, the tenants can agree on who pays what and how much. This can be based-off on earlier formula on lease payments. Utility can include gas, hydro, electricity, environment tax, cable license, phone bills, property tax, maintenance fee, security, cleaning, snow –removal etc.

Dedicated Owner’s Place: You want to agree or finalize if you will need a dedicated place in the property main area. I may want to have a store or corner or stage that I want to maintain and should be off-limit to the co-tenant.

Exclusivity Clause: Consider building in clauses to protect your business. Such as preventing the co-tenants or landlord in subleasing during the duration of your current lease, mark-up days and time of the week each co-tenants will use property, theft and pollution (noise, sound and air) etc.

Parking: Are there designated parking? How often will any of the co-tenants use parking and how do we want to square this between each tenants given the number of customers, guests, employees and/or volunteers the two business often attracts that require parking.

Signage: We will be putting up a signage, are you going to be having one? What is the take of the broker or landlord? For decorations, post, pictures and art-work- Are you going to be putting anything on the walls or doors or windows.

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