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Terms of Build Out in a Commercial Lease

Building Out The Leased Location for Your Business

Did you start a new business? Did you sign a franchise agreement?

If so‚ the next step is to focus on your business location and if you are like most other franchisees and start-up entrepreneurs your next big task will be negotiating a lease agreement and building-out your new business location. Aside from your business purchase agreement and‚ if applicable‚ your franchise agreement‚ the lease for your business premises will impact the economics of your business for many years to come. One critical lease negotiation issue relates to "build-out". That is‚ the construction to be performed to get your new location up and running‚ the responsibilities of your new landlord and your responsibilities as a tenant.

When evaluating the build-out for your new location and evaluating the lease agreement‚ consider:

  • The current condition of the leased location and in what condition is the landlord obligate to deliver possession
  • Whether or not there is an adequate HVAC system
  • Whether or not the current electrical capacity will meet the needs of your business
  • What construction obligations will the landlord undertake at the landlord's expense
  • Restrictions and obligations that may be imposed on you as to the contractors that you may hire and utilize and whether or not the landlord must approve all build-out and construction plans.

When negotiating your lease agreement understand that there are many "moving parts" and in addition to build-out obligations you should be considering and discussing with your lawyer issues involving‚ base rent‚ additional rent‚ common area maintenance obligations and tax obligations. Since your lease agreement will be critical to the future operations of your business‚ it is important to take some time to make sure you get it right.

For more information about buying a franchise, contact us at (800) 976-4904 or read our resources below.

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