When you have found a location that works for you, it’s time to submit an offer and come to initial terms. You will need to prepare financials to represent yourself to the owner and your broker should draw up a proposal/term sheet to submit to the landlord on your behalf.
A typical financial package consists of the following:
- Two years of tax returns for the business
- Three months of bank statements
- A profit and loss statement
- Company Bio
- Company History
- Background of Principals
- Clients
- Press
- References
- Business Plan
Individual information can be used in lieu of business information if the business is a new entity. Any given financial package may contain all of this, or as much as you can put together.
Here are the basic terms on a Proposal to Lease:
TENANT: Your Business name
PRINCIPALS: Owners’ names
LOCATED AT: Current address if applicable
BUILDING: Address of the location
SPACE/AREA: Square footage you’re requesting
POSESSION: The date you will gain access, can be upon lease signing – or any other date
LEASE TERM: Number years and renewal options if requested
BASE RENTAL RATE: Your offer
RENT CONCESSION: A number of months of free rent you may be requesting
ESCALATION: How much your rent will go up each year, 3% is standard in the current market – Fixed per annum, commencing upon 1st anniversary of possession
REAL ESTATE TAX: Tenant shall be responsible for increases of real estate taxes over base year (unless consummating a NN or NNN lease, in which tenant is responsible for all building taxes)
UTILITIES: Tenant shall pay for their own utilities, electricity, water and gas – include what utilities are to be paid and whether the tenant is directly billed or sub-metered
USE: Tell the landlord what you’re going to use the space for
SECURITY DEPOSIT: This is determined by the strength of your financials submitted
DELIVERY CONDITION: Will you take the space ‘as-is’? What work do you want landlord to do? Spell it all out!
TENANT WORK: What work do you propose to do? Spell it all out!
Expect a counteroffer and many discussions before coming to an agreement on basic terms. The next step is receiving a lease. You should have an attorney familiar with real estate to review the lease for you. Here is a list of the top 100 lease issues for office tenants, but these issues are relevant to all types of tenants.