4 Hidden Costs Lurking In Your Commercial Real Estate Lease

When you are starting out in a new business one of the most important things to do is to keep your costs down. The first years are a bit precarious and if you have a lot of overhead during this period when you’re not making much revenue, then it can put a lot of pressure on your business.

This is exactly why you need to understand all of the costs you are about to face. Unfortunately, many expenses are overlooked and come as a surprise. And usually at the worst time. In this article, we will go over the hidden costs you may find yourself dealing with when you are leasing a commercial property.

1 – Maintenance

The lease you sign needs to clearly state who is responsible for what when it comes to maintenance. Most of the maintenance is going to be covered by the owner and not the renter. The heating system for instance will likely be maintained and serviced by the owner of the property.

Likewise having repairs made to the equipment or property.

However, there are other things that need to be on the lease so you don’t get stuck paying. Commercial snow clearing is a big expense and if it doesn’t say in the lease that the responsibility goes to the landlord then you may be paying for that out of pocket.

2 – Property taxes

Generally, the owner of the commercial property is responsible for all of the property taxes as they own the property. However, there are times when a bill will come due for the renter to pay a portion of those taxes.

For instance, if the business starts doing well and upgrades to the space were made that increase the value of the property, then the taxes may be raised. And if you don’t explicitly say so in the lease, the increase in taxes may be put on the renter.

3 – Upgrades

Over time a property can start showing wear and tear and need some upgrades.

It could be to the HVAC system or it could be the structure itself. Some of the upgrades may not be postponed and will have to be made while you are leasing. In which case some of the expense may be placed on your shoulders.

Depending on the type of upgrades, this can cost in the thousands of dollars for the renter.

4 – Increased operating expenses

Some of the added expenses are unavoidable and can’t be expressly stated in a lease yet, the renter has to pay. For instance, an increase in utility costs can end up taking a chunk of your profit margins if you have a business with high energy demand.

Other additions can actually be the rent itself but this needs to be highlighted in the lease so it isn’t a surprise. Rent increases should be predictable and clearly understood well ahead of time especially if they are based on the revenue of your business.

Jeff Campbell

Jeff Campbell is a father, martial artist, budget-master, Disney-addict, musician, and recovering foodie having spent over 2 decades as a leader for Whole Foods Market. Click to learn more about me

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