How to Get a Good Deal on a Lease

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3. Plan an Escape Clause and Other Provisions

Leases almost always favor the landlord. But you can build in clauses that level the playing field. Be strategic in setting priorities. "I try not to make wholesale changes, because they're not likely to be accepted," says Rick Gier, a lawyer in Overland Park, Kansas. "I'm more concerned with making four or five important changes than 20 small changes."

Co-tenancy: Many shopping centers rely on big anchor stores to draw traffic. So what happens to the smaller tenants when an anchor closes its doors? A co-tenancy clause lets a renter escape the lease if the landlord doesn't replace the anchor in a specified period.

"Good-guy" clause: In exchange for a personal guaranty, a good-guy clause holds a tenant that defaults on a lease liable only for the rent owed before the renter vacates the property, rather than until the lease ends. Good-guy clauses are popular in New York City but are less common elsewhere.

Personal guaranty release: Most landlords will insist on a personal guaranty from the tenant. As an alternative to a good-guy clause, ask for a release from the guaranty after, say, two or three years.

Exclusivity: An exclusivity clause guarantees a direct competitor won't move into the same development.

Sublease: A sublease allows a tenant to sublet space to a complementary business. A salon, for instance, might sublet to a massage business. "A sublease allows you to turn your fixed costs into variable costs," says Harper.

Guaranteed selling points: Landlords often make a selling point of high occupancy rates or a large number of monthly visitors. Harper recommends getting these in writing and exacting concessions (including the freedom to leave) if the landlord falls, say, 20 percent below the guarantees.

Of Brokers, Beware

You may have recruited your broker, but your broker isn't necessarily working for you. He is working for the landlord who pays the commission -- in most markets from 5 percent to 6 percent of the total lease value, split between the landlord's listing agent and the broker who introduced you to the property. Here are other things to keep in mind about brokers:

Listen to your lawyer. A good real estate lawyer -- who really does work for you -- can recommend brokers who will advise you in good faith.

Trust but verify. Small-business counselors advise against leaning too heavily on your broker when it comes time to negotiate. "Most brokers will do whatever it takes to get the deal signed and don't want to add complexity," says Harper. All contract details should cross your lawyer's desk.

Don't go it alone. The previous point notwithstanding, negotiating on your own behalf won't put extra money in your pocket. The share of the commission that would have gone to your broker will just go to the listing agent. And you could miss opportunities for concessions.

Make sure your broker has experience in your market. Commercial real estate divides into three segments: retail, office, and industrial. Each involves different issues and market trends. The amount of free rent available, for instance, will vary both by geography and market.

Keep your options open. Some brokers will insist on an exclusive representation agreement. Resist it, says Harper. If you do sign a tenant representation agreement, your hands are pretty much tied, he says.

Renegotiate Now

Even if you are locked into a lease, you still have leverage to renegotiate, particularly in the current environment. Given the time and cost involved, most landlords will be reluctant to sue a tenant that is forced by circumstances to break a lease, says Fried. Moreover, he adds, "it takes time to find somebody new, and when they find somebody, they're going to want free money." In other words, a landlord has a lot of incentive to work out a deal if you can convince him or her that you are going through a tough period.

That said, some negotiating tactics are better than others. "Most landlords are willing to do something that's short term," says Cooper. "You're more likely to get something like a 25 percent rent abatement for the next six months than getting your rent reduced for the rest of the lease."

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