Recently we posted an article about finding office space. While much of that story dealt with buying your own space, leasing is another option. But there are some considerations to keep in mind, according to attorney Richard Feeley, president of Feeley Mediation and Business Law, in Marietta, Ga., who says that commercial leases can run from the rare month-to-month arrangement to leases of several years.
“It all depends on the location and the use,” Feeley says. “There can be a number of things involved in a commercial lease, especially since the space typically has to be built out for the tenant’s use. Some multi-year deals may include an allowance for those improvements. Thus, depending on the type of space and length of the lease, it may make good sense for the remodeler looking to establish a commercial space to work with a commercial real estate agent to get the best deal and use needs.”
Exit Clause?
Some remodelers might worry about getting out of their lease if their business activity doesn’t support the cost and they are reluctant to put their personal assets in jeopardy. Feeley advises caution: “Commercial leases, just like commercial credit accounts and other accounts, are highly connected to the ability of the business to cover the obligation,” he says.
For example, an established home builder with a good reputation in the community may have no problem obtaining a lease in the business name only that would not include personal guaranties. On the other hand, a remodeler who is renting his first commercial space may very well have to personally guarantee the obligations under the lease if his company doesn’t have the assets or business history to support it.
Feeley says that it is essential for the remodeler to first establish his company as a legal entity (corporation, LLC, partnership, etc.). “Then, it is essential that the remodeler manage the financial and other aspects of that legal entity in a manner separate from his personal financial dealings,” he explains. “The longer and stronger credit and financial history the business entity has, the more likely a commercial landlord may lease a property without requiring personal guarantees.”
Although, you didn’t need a lawyer or anyone else to tell you this, but if you’re running your business in an efficient, professional manner, you likely won’t have any issues finding the right commercial space for your company. Then again, if there are a number of foreclosures in your area, you might find a good deal on commercial property to purchase. —Mark A. Newman, senior editor, REMODELING.
Related articles:
Business How To: Finding Office Space
Subletting Space: One way that more businesses are using to recover occupancy costs is to sublet some of their office space
Prime Time to Renegotiate Your Lease? Reducing expenses during tight times may be easier than you think
