When negotiating leases on behalf of commercial tenants, it’s important to think carefully about the multitude of things that can go wrong for a tenant after lease signing. Accounting for the “worst case scenario” in each key lease component is an absolute must. This is especially true when tenant improvements are a part of the negotiation. Accounting for circumstances that are outside of the tenant’s control, and ensuring the tenant isn’t exposed to the impact of those changing circumstances, is critical.

There are many items that tenants cannot control, or at least completely control, some of which include the timing of obtaining permits, future building costs, inflation, future maintenance items such as HVAC, and much more. While having a great deal of experience in tenant negotiations does provide a good commercial broker with a “checklist” of common items to account for, critically thinking about the unique aspects of a tenant and their business is equally important. For example, the unknown risk factors for a restaurant tenant are much different than they are for an office or industrial tenant. Digging in even further, the risk factors from one restaurant tenant to another are often quite different.

Ultimately, you cannot negotiate away every risk for a tenant, but you want every tenant to go into their lease with their eyes wide open and a good comfort level that the risks have been mitigated to the extent that any unforeseen speed bumps may prove bothersome, but ultimate won’t harm their business in any material way.