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@064 CHAP 1
┌───────────────────────────────────────────────┐
│ CHECKLIST FOR SIGNING A BUSINESS LEASE │
└───────────────────────────────────────────────┘
"If anything can go wrong it will. Nature always
sides with the hidden flaw." -- Murphy's Law
"Murphy was a optimist." -- O'Toole's Law
If you will need to lease space to operate your business in, have you
located a suitable place that is available to you? If so, here are a
number of critical points you need to consider before you sign a lease
with the landlord:
. The term of the lease. Most businesses tend to start off by
either growing rapidly or quickly folding. Thus, except in a
retail or service business, you will probably be better off
leasing initially on a month-to-month basis or for as short a
lease term as you can get, such as three or six months, even if
the monthly rent is higher than for a longer lease. You will
have enough financial problems already if your business fails,
without being saddled with a long-term lease obligation. If all
goes well, and you need to expand into a larger facility, you
won't be constrained by a long-term lease on a place you have
outgrown.
. Whether you can put up the kind of sign you must have, as large
as you need, on the building. A business like a restaurant can
be devastated if the landlord doesn't permit a sign that is suf-
ficiently visible to passersby.
. Whether the landlord will permit you to make necessary improve-
ments and alterations to the leased premises.
. Whether the local health department, fire & police departments,
air pollution control authorities and zoning rules will permit
operation of your particular type of business at the location
you have chosen. If not, it is better to find out BEFORE you
have signed the lease.
. Whether your location is in a high crime area that will require
expensive burglary insurance and security precautions.
. Whether there is enough parking nearby or good public transit
access for customers.
. Whether the location is appropriate to the kind of business you
will conduct. There is usually no need to locate a manufacturing
operation in a busy, high-traffic area. On the other hand,
retail businesses are usually heavily dependent on the number of
people passing nearby on foot or by car. For example, the owners
of the Burger King chain reportedly select sites for their fast
restaurants by looking for locations that have at least 16,000
cars passing by each day at an average speed of about 30 miles
per hour.
. Whether the lease provides you an option to renew (and at what
rental?) after the initial term expires.
. Whether, if the lease is for more than just a few months, you
have the right to sublease or assign the lease. If so, under
what conditions or restrictions? Are the restrictions reasonable
ones that you can live with? (Remember that a lease is a binding
legal contract, and that if you agree to pay rent of $1,000 a
month for two years, you are on the hook for $24,000 unless you
can sublease or assign the lease to someone else--which the
lease, or the landlord, may make difficult or impossible to do.)