What Businesses Should Know Before Leasing an Older Commercial Property

Old commercial properties are very appealing options for companies seeking character or established business locations at lower rents. But old buildings come with their own set of maintenance problems, compliance issues, and even expenses that are not readily apparent on inspection. It is important for companies to consider all the issues associated with commercial leasing before actually signing the lease.

Consider the Building’s Age and Condition

The age of the building you intend to rent will help you to understand what kind of maintenance to expect in the future. An older building will likely have an old electrical system, plumbing, insulation, roof, heating or cooling units or any other components of the building that need to be repaired or replaced one day.

However, an older building is not necessarily bad. Quite the contrary, most of the older buildings are usually in the business area and they have many advantages that new constructions lack. The key to successful renting of the commercial building is to know everything about the building before making the deal.

Ask your landlord about the age of the systems in the building and if there were any renovations recently. If it is possible, do not sign the contract without inspection of the building by a specialist.

Review the Property’s History and Documentation

Firms need to go past the physical attributes of the property in order to perform thorough due diligence. The history of renovations, changes in ownership and the original construction date can all prove helpful.

It becomes especially necessary when handling an old property. Documentation is required in order to examine all relevant issues related to the property. For buildings constructed before 1978, it is also worth determining whether any federal, state, or local requirements concerning lead-based paint disclosure apply to the particular transaction or property.

The federal disclosure regulation is mainly meant for residential properties, and therefore a business should not think that all commercial leases require such disclosures. Nevertheless, having knowledge about the age of the property and any relevant regulations can help the business to ask the right questions prior to leasing it.

It is always good to know what to expect beforehand because the business can then make arrangements and take the necessary precaution measures. It is much easier to learn about a problem before leasing a property than after relocating employees, equipment, and inventories into it.

Understand What the Lease Makes You Responsible For

Another key consideration in renting business property is determining precisely whose job it is to take care of repairs, maintenance, and improvements. While a property might look in good condition, the lease might put certain expenses on the lessee.

Make sure that you look carefully at the sections in which it is stated who is responsible for making structural repairs, heating ventilation and air conditioning system maintenance, plumbing, electric work, common area maintenance, landscaping, pest control, and other maintenance work.

At the same time, pay close attention to the sections regarding improvements. If you are going to put up partitions, install specialized equipment, lay down new floor coverings, etc., determine whether you need the landlord’s permission and who will pay for the removal of the improvements upon lease expiration.

Calculate the Full Cost of Occupancy

The rent itself is not the only expense in using the commercial property. It would be best if you calculated the whole occupancy cost to know if the space will fit your budget.

If the form of the lease does not cover utilities, insurance, property tax, maintenance cost, common area cost, among others, then those costs could affect the cost of the property greatly.

It is important that you ask the landlord to provide you with an itemized list of extra costs and consider how such costs could increase or vary over time if there is such a clause in the lease.

Plan Your Signage and Business Branding

The opening of a new commercial space will also provide the chance to make a good physical impression. Before signing any contract, companies need to ascertain what types of signage are allowed at the particular property, as well as if there are any limitations related to exterior signs, window graphics, banners, lighting, or any other promotions.

It is especially vital for those companies which operate based on foot traffic. While a property might have plenty of people passing by, the restriction on signage might make it harder for customers to recognize the company.

Businesses should also take into account temporary promotion materials when planning a new location or launch. A professional display will assist in introducing a company to potential customers in the vicinity, and businesses can make use of online design tools to create a banner that will fit with the existing corporate image but is also appropriate for the property.

Considering these details from the outset will ensure that a frequent problem does not occur – entering a new location and finding out that the envisioned corporate image/signage cannot be utilized there.

Think About Employees and Customers

A commercial property has to serve the people that will use it daily. The company should think about the accessibility, parking, lighting, ventilation, security, restrooms, and overall state of the working space.

Location is important as well. Consider the convenience with which employees will be able to reach the property, as well as how accessible the property is for customers or clients. The property that seems like an economical option at first glance can become a less attractive one because of poor accessibility or parking, which might affect either employee turnover or the number of customers.

For businesses that plan to expand in the future, it is also reasonable to consider the possibility of accommodating the extra staff, equipment, storage space, and even changes in the operations. Relocation after a short time might cost much more than choosing another property initially.

Document the Property Before Moving In

Take detailed notes of the condition prior to taking control of the space. This includes taking pictures and videos of the interior and exterior of the premises, such as walls, floors, ceilings, windows, fixtures, and pre-existing damages.

Businesses need to have a list of issues that existed prior to occupying the premises and hand it over to the landlord where necessary. It will avoid future disputes over the issue of whether the damage was done during the tenure of the lease agreement.

A business needs to store important documents such as the executed lease contract, inspection report, disclosure forms, communications with the landlord, and documentation regarding improvements approved by the landlord. Having these documents well-organized can make the process very easy for you.

Plan for the Long Term

A commercial lease is valid for many years to come, so signing one should not depend entirely on whether or not the property is appealing at present. Take into account the way the business will evolve during the period of the lease, and whether the property is capable of accommodating those changes.

Make sure that you examine the conditions concerning renewal of the lease, increase of rent, termination of the contract, subleasing, and possible limitations regarding the use of the premises. If the location is crucial for your business, then having certain terms of renewing the lease might be especially necessary.

You may want to consult with an attorney specializing in commercial real estate before signing.

Final Thoughts

Leasing an older commercial property may enable businesses to get access to a good location without having to incur the expense of buying or building a new structure. Nevertheless, making the choice should involve more than just evaluating the costs of rent. By analyzing the state of the property and its history, reviewing all relevant disclosures, knowing lease obligations, planning signs, determining total occupancy cost, and anticipating future business requirements, one can minimize the risk of costly surprises.

The process of performing due diligence prior to leasing an older commercial property will make one’s move into a new business space less problematic.

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