Want the best deal on your office lease? There’s more to negotiate than just rent and incentives.
When negotiating your office lease, many businesses focus solely on rent and incentives such as rent-free periods or fit-out contributions. But savvy tenants know that a great deal goes far beyond those headline numbers.
Office leases are complex commercial agreements, and understanding what’s on the table – and negotiating the right terms – can save you significant money, stress, and risk over the life of the lease.
Here’s are 44 key terms you should be negotiating – because the rent is only part of the story.
Lease duration
Getting the right lease length is crucial for both flexibility and security. Make sure you negotiate:
- Lease term: Length of the initial lease period.
- Commencement date: When the lease officially starts.
- Renewal options: Right to renew the lease and terms of renewal.
- Option notice period: Timeframe and process for exercising a renewal option.
- Early termination rights: Whether and under what circumstances the lease can be terminated early.
- Holdover provisions: What happens if you need to stay beyond the lease term (e.g. month-to-month tenancy, penalty rates).
Rent
Beyond the initial rent figure, there are other important rent-related issues to negotiate:
- Rent amount: The base amount of rent payable.
NB: Landlords prefer not to lower the rent because that decreases the value of their buildings. Instead, they may offer an incentive (see below) to discount the effective rent (what you actually pay per month).
- Rent reviews: Frequency and method of rent review (e.g. market review, fixed percentage, fixed amount, CPI).
- No “rachet” clause: A clause that typically prevents the rent from decreasing, even if market rents have gone down.
- Rent abatement clauses: Circumstances where rent might be reduced (e.g. damage to premises, loss of access).
Incentives
Incentives are often part of the initial offer, but savvy tenants know they’re negotiable:
- Rent-free period: Duration and conditions of any rent-free period.
- Fit-out contribution: Financial contribution by the landlord towards tenant fit-out.
- Rent abatement (reduction): Reductions in rent over the lease term.
- Other incentives: Any additional benefits (e.g. contribution to relocation costs, provision of furniture).
Fit-out and alterations
Don’t overlook what work will be done to get the space ready:
- Lessor’s works (landlord works): Improvements to be completed by the landlord before lease commencement (e.g. base building upgrades).
- Building services: The systems and equipment that provide essential utilities and amenities to a building – mechanical, electrical, fire and hydraulic.
- Fit-out ownership: Who owns the fit-out during and after the lease (landlord vs. tenant).
- Restoration of fit-out: Whether the tenant must remove the fit-out at lease end.
- Access for fit-out works: Right to early access for fit-out before lease commencement.
Make good and end-of-lease obligations
End-of-lease costs can be a nasty surprise if not negotiated upfront:
- Make-good obligations: Requirement to restore premises to original or agreed condition at lease end.
- Extent of make good: Whether full restoration, partial restoration, or none is required.
- Condition reports: Use of an entry condition report to establish starting condition.
- Restoration exclusions: Any agreed exclusions from make-good obligations (e.g. improvements beneficial to landlord).
Outgoings and operating expenses
Beyond rent, outgoings can be a major cost. Make sure they’re clear and fair:
- Outgoings payable: List of outgoings the tenant is responsible for.
- Type of lease: Whether the lease is gross (landlord covers outgoings) or net (tenant pays outgoings).
- Audit rights: Tenant’s right to review/audit outgoings statements.
- Management fees: Inclusion and calculation of building management fees.
- Common area maintenance: Tenant’s contribution to maintenance of shared areas.
Rights and obligations
Clarify what you can (and can’t) do with the space:
- Permitted use: Agreed use of the premises and any restrictions.
- Exclusivity clauses: Whether the tenant has exclusive rights to certain uses or industries.
- Assignment and subletting: Conditions under which the lease can be assigned or sublet.
- Access rights: Hours of access (e.g. 24/7 access vs. restricted hours).
- Signage rights: Right to display signage and where (e.g. building directory, external signs).
- Quiet enjoyment: Tenant’s right to occupy without interference.
Security deposit and guarantees
Landlords want a security deposit – but there’s room to negotiate:
- Security deposit/bond: Amount, form (cash or bank guarantee), and terms of the security deposit.
- Bank guarantee terms: Format, duration, and return conditions for bank guarantees.
- Personal guarantees: Whether directors or individuals must provide personal guarantees.
- Review of security over time: Whether security can be reduced as the lease progresses.
Other commercial terms
The extras that impact your day-to-day:
- Car parking rights: Allocation, cost, and conditions of use for parking spaces.
- Additional space: Right of first refusal to take up additional space that becomes available in the building.
- Storage space: Availability and cost of any additional storage areas.
- Technology and services: Access to telecommunications, internet, and building services.
- Environmental/green lease provisions: Requirements for energy efficiency, recycling, and sustainability initiatives.
- Insurance obligations: Tenant and landlord insurance responsibilities (e.g. public liability, contents, building insurance).
No substitute for expert advice
Negotiating an office lease is a critical business transaction, and there is no substitute for expert advice to give you the advantage.
An independent tenant representative like TRS works solely for tenants – not landlords – to ensure you get the best possible deal. From rent and incentives to make-good and outgoings, TRS helps you avoid costly mistakes and secure terms that work for your business.
Contact us now to find out how we can help you get the best deal on your next office lease.
