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Ask an outside consultant

  • November 2, 2008 - 10:14 PM

Q Currently, we are operating with what seems to be an overpriced lease. With high vacancy rates and relatively low lease rates available, should I be looking to renegotiate the lease or break it altogether to lock in a more affordable space?

RANDY ZARECKI

FITNESS TOGETHER

A Leases are legally binding contracts and if you were to break the lease by moving, the liabilities would likely be substantial.

Leases work two ways: Tenants can negotiate favorable terms prior to lease rates increasing or more-favorable terms when rental rates are declining. Lease clauses for early cancellation, assignment or subletting the space can be negotiated as part of the lease agreement. These are important issues that define the tenant's rights and responsibilities. The current landlord may be open to renegotiating the lease if there is an agreement to extend the it or rent additional space.

Facility costs are a large component of small-business operating budgets, and the location and space amenities play a major role in business success.

When deciding to renegotiate the current lease or relocate, consider how the space works for the customers.

Also consider the possibility of losing customers, any expenses that may be incurred if the business were to be relocated and how the current space could be improved to better meet your needs.

Weighing these variables will help determine the best course of action for the business and the customer.

THOMAS A. MUSIL, DIRECTOR,

SHENEHON CENTER FOR REAL ESTATE,

MASTER OF SCIENCE IN REAL ESTATE,

UNIVERSITY OF ST. THOMAS

OPUS COLLEGE OF BUSINESS

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