Balancing Expenses Before you Sign that Lease

Office rent eats up a huge chunk of the monthly profits of any business. Thus, settling on an appropriate amount after understanding every charge mentioned in the lease is given prominence by prudent businessmen. If you, too, are soon going to sign the ever-dreaded office space lease, have a glance at the following to balance your expenses wisely:

Rent Genuinity

To consider the fairness of your rent amount, consider the square footage you have been offered. Ideally, leased office spaces offer 75% to 90% of the total area allotted as usable. Anything less than this is a loss to the business. Also, ensure to get the area measure with the help of an architect to steer clear of doubts, if any.

Rent Escalation Mechanics

With the ever-increasing real estate costs, rent escalations are bound to happen yearly. It is, thus, important to understand its mechanism and the method to calculate it per the increment rules of the realty sector. Seek clarity on the method of rent increment and cross-check its viability with an expert on the subject. Not paying heed to this lease term may throw your future operational costs off balance.

Operational Expenses

Never sign the lease until you know what the umbrella term ‘operating expenses' includes. Expenses like the onus of structural repairs, cost of customization, responsibility for minor renovations and capital improvements, methodology for calculating electricity, or any ambiguous overhead terms demand an explanation. It would not let you pay for what you use but also save you from litigation risks in case of probable future disputes.

Property Taxes

Property taxes happen to be the sole responsibility of the landlord. These cannot be added to the lease amount to be payable for a simple reason: you do not own the asset. Scan the lease terms to be double-sure of any such amount not being added to your rent since if you sign the lease, it will become your liability.

Dispute Redressal

Lastly, understand the dispute redressal mechanism clearly. In no case should there be a clause for you to keep making payments until the matter is resolved in court or via arbitration. It puts the tenant in a lose-lose situation, with monthly expenses and litigation costs flowing out of the accounts constantly. A clause withholding the right to make further payments until dispute redressal is the best way of deterring unscrupulous landlords from attempting foul practices in the first place.