2013-04-18 00:00:00Starting a BusinessEnglishhttps://quickbooks.intuit.com/in/resources/in_qrc/uploads/2017/05/commercial-lease1.jpgWhat You Need To Know Before Signing A Commercial Lease

What You Need To Know Before Signing A Commercial Lease

2 min read

Business centers, commercial ‘plazas’ are a common sight in Indian towns and cities, thanks to the realty boom and overall buoyancy in the economy. Most of these commercial buildings come with built in basic infrastructure such as electricity and water supply, local body approvals, etc. In some cases, they even have the furniture and fixture in place, sometimes with the computer systems included. It’s a boon for all those businesses that are looking for office/workshop space without going into the hassle of setting-up an office. The ‘package-deal’ works out well for them with the consideration being rentals or lease payments. However, before you sign the agreement, we urge you to do your homework regarding the rules and regulations in your city of business as well as the normal practices that are followed for such commercial rentals/leases. The pointers below will help you to find out what you should look out for: • Total Cost: Read the lease agreement carefully to find out what components make up the total cost of the lease. This will include the cost per square foot of the rental area and the other subsidiary charges like common area maintenance (CAM) costs – i.e., charges for maintaining courtyards, entry and exit points, common areas, utilities; property taxes, property insurance, house-keeping, garbage collection etc. • Facilities Provided: Find out if the lease agreement will provide for the air-conditioning, security, broadband facility, separate restrooms, house-keeping facilities of the rental area. If yes, a blanket charge will probably be applicable. If no, find out from your broker and the other tenants how easy/difficult it is to get the afore-mentioned amenities in place and the applicable charges too. • Terms & Conditions: This is the difficult part as you need to ask yourself a number of questions before you agree on the terms and conditions. – Firstly, assess your space requirement. Include a sound business estimation of growth in the ensuing months. You wouldn’t want to be grappling for space 6-7 months into your occupation. – Secondly, make a sound judgment on the number of years you want to take the lease for. In case you have just started your business and are not sure of its performance in the day’s ahead, consider taking a shorter lease thereby protecting yourself from high rental penalties. Should you already have a reasonably sound business running, consider taking a longer lease for that will enable you to negotiate special terms, such as a discounted rate, adjustments to rent during slow seasons or a few months’ worth of free rent for moving in. – Thirdly, assess the availability of space in the same building or at best nearby buildings/areas should you need to expand in a big way and accommodate a bigger staff. You wouldn’t want to be juggling two differently located areas while managing operations. Hence, see to it that the present location gives you enough scope for expansion when the need arises.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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