The pitfalls of the office lease contract
You are about to sign a lease for your office space. However, important pitfalls are to be avoided. Discover our insider tips, all in your benefit !
The lack of legal practice of an office tenant can be expensive, since renting a building is a significant part of a company's expenses.
In order to tailor the lease to your needs, we recommend these 5 tips:
1. Prepare entry and exit conditions
The inventory of places of entry and exit are essential steps to be able to negotiate well the leaving of lease. This is a proof of the condition of the property at the time of keys’ return.
Think of the exit before signing a lease. You are still in a strong position before the signature of such a precious document.
The contract also specifies exit conditions. Indeed, it is stipulated in most leases that the tenant must return the place in "pristine state" upon leaving, i.e. in its original state. This phrase can have serious consequences, even if the lease already takes into account, for example, the normal wear and tear that is 6 years for paints and 9 years for carpeting.
You will need to restore everything at the end of the lease. Make sure to avoid ‘dilapidation’, e.g., removal of partitions or other amenities. In addition, the clause proposed by the owner can oblige the tenant to pay 2 or 3 months’ rent in case of non-occupancy during the works. You execute the works by yourself but you may have to pay for it…
Check if a rental unemployment clause during the works is included in the lease and if it includes charges and taxes.
The warrant is returned when you leave, but with a subtraction in case of damage ... Experts will then notice the damage that occurred during the term of the lease. In the event of a dispute, the District Court may appoint an expert who will deliver a report to the Judge who will then deliberate. Redouble attention: the owners usually offer an expert, which is often accepted by the tenant. It is better to choose an independent professional in order to avoid certain expenses.
2. Check the rental charges
Ask your landlord for an estimate of the building's common charges and seek expert advice. Ask for the charges to be listed exhaustively. Pay attention to the fact that you will not have to participate in the amount of charges for vacant premises. This must be fully supported by the owner. Your share of common expenses must be proportional to the space you rent.
Do not forget to inquire about the amount of fees claimed for the management of the building (stewardship fees). These can vary from single to triple without any objective reason and will be charged to you. As a tenant, it is not normal to be charged for structural repairs to the building or for its beautification. It is up to the owner to renovate facades or elevators, for example.
Rental charges must be limited. As an occupant, you must have control over the costs incurred for the building’s maintenance
In the lease, the rent is specified excluding expenses ... Distinguish three types of charges invoiced:
• common charges for all tenants of the building
• the expenses of the tenant
• the owner's charges
Make sure the charges to the owner are not charged to you!
Common expenses are not always well described in the lease contract. Some topics remain unclear, such as those labelled "miscellaneous." Double your caution as a potential tenant.
The owner or agent announces relatively low expense provisions to make the lease more attractive.
In the first count, the charges are sometimes much higher than what was announced when the lease was signed. Remember that the age and construction of the building also have an influence on the amount of charges!
Here also, ask the relevant questions:
• What is planned for common expenses?
• Is the omnium part of the elevator maintenance contract your responsibility?
• What about the total guarantee of the maintenance contract for HVAC installations?
• Who has to finance / pay for facades?
• Are the quotas correctly established? The proportion of occupied areas must correspond to what appears in the basic act.
To answer these questions, ask the owner for a summary of the previous year's expenses.
Remember: 90% of tenants pay ... without knowing what they are really paying. Again, get professional advice.
3. How long is your lease?
In the commercial field, there is no bond term on the lease. In general, the rental formula is 3-6-9 with a break every 3 years. The idea is to take a flexible lease for the tenant so that he can have a right of renunciation (the power to waive the lease) without the owner also having a renunciation right. There is therefore no obligation to rent for 9 years.
A unilateral renunciation is possible for tenants.
What about your break period: is it 3 or 6 years old? What are your exit conditions in case of lease termination, how to give in your notice and when? 6 or 9 months before?
Again, asking the right questions will save you a lot of trouble.
4. Do an audit of your needs before committing to an office space
You have already verified the market price and the area that suits your needs before obtaining this lease. That's a good start. Next step : list your needs and desires. A useless square meter is an expensive one... Adapt it to the need of your organization and bring down your rental cost. Determine the exact size needed as a workspace with an architect and a good Tenant Rep.
A 100% independent real estate consultant can make an analysis of the state of the property, which will tell you exactly how many m2 the space you need and wether the HVAC system is efficient enough.
In order to avoid conflicts of interest, opt for a consultant who benefits the tenant and draws up a complete and objective financial statement.
5. Ask for the advice of a professional
An informed tenant is worth two. An Independent Tenant Rep reviews your lease agreement in order to make sure where the potential pitfalls are.
You may also consult with them if you wish to cancel your contract, renew it or carry out works...
The rep keepers include the real estate market. They negotiate to your advantage, are free from conflicting interests, and are able to reduce the cost of building occupation that would be best for your organization. Their know-how and their advice are precious, call on them!