Many companies focus on the basics before signing a lease agreement – how much space is available, whether or not the location fits their needs, and what amenities and services are available. This isn’t wrong, but many businesses overlook the terms of their lease agreements. While we cannot provide legal advice to you, you may want to consider the legal aspect of any lease agreement you sign and how changes in the area may affect your business.
Here are some of the major questions to ask when considering Chicago Loop office leases:
- How are taxes allocated? You should know if there will be additional expenses above and beyond the amount your business is paying for rent. What are the terms to pay any tax adjustments at the end of each year?
- What operating expenses will you be responsible for? If the Landlord installs a fitness center in the building how will this effect your operating expenses? How is the tenants proportionate share of expenses allocated when the building is less than 100% occupied?
- Is the Landlord required to contest building taxes at no cost to you? If the Landlord does decide to contest taxes, will the legal fee fall to the tenants? You need to know where you’ll be standing – and how much you’ll be responsible for. A Landlord who can freely (and legally) make you pay for their legal cases may be more likely to bring them forward.
- Will you have access to audit the Landlord’s expenses and contest them? Does the Landlord prohibit the hiring of an auditor on a “contingent fee” basis? Are you allowed enough time to have an audit completed? Does the landlord retain a natinally or locally recognized public accounting firm annually to perform their own audits?
- What hours will the building A/C be on without extra fees being assigned? Modern businesses – especially those with a lot of technology – tend to generate a lot of heat as well. You should know when the system will be available and what you’ll be charged if you use it past the specified hours.
- Will you have access to the riser room or will there be third party fees associated with bringing fiber to the floor? Most buildings outsource the management of their riser closets (the rooms throughout a building that brings outside circuits to the floors.) Can you negotiate these fees into your lease? If not, are there any controls on how much you can be charged to bring circuits up to your floor?
- What are the terms of a Holdover period? When you are signing a 5 or 10 year lease, it is hard to imagine that there is much need for a Holdover period at the end of your lease. But often times, things don’t go as you expect and you need to stay in your space longer that your lease allows; at rents during the holdover period at 150% or more of your current rent. It is a good idea to try and minimize any rent increase for the initial couple of months during a Holdover period.
- What rights will the Landlord reserve? How might these rights affect your business? Most Landlords will retain a considerable amount of power – up to and including the right to evict you for failure to follow their other rules. Some of these rights may damage your ability to do business – or, in rare cases, enhance it. You should be fully aware of your Landlord’s rights and talk to them about any rights you need to control.
- What is the subletting clause? You may not need the full amount of space allocated to you – which can be difficult if your Landlord has a minimum amount of space they’re willing to lease out. At times like these, subletting and sharing with another tenant can be a boon, but there may be restrictions on how you’re allowed to do this. Understand your continuing liabilities after subletting your space and the grounds for which the Landlord may withhold consent.
- What happens if you sells your company? Can the Landlord reject the new owner? If you sell your company, chances are the Landlord will require the acquiring company to have as good or better financials than your company. Think of every possibility before entering into a long term lease.
- How can the lease be terminated? This is arguably the most important thing to know. What are your rights if the building or part of the building becomes “untenantable?”
Many tenants fall into the trap of focusing on the immediate terms of the lease and failing to project their long-term needs when signing an extended lease agreement. This type of mistake can be a major stumbling block over time – but asking the above questions can help you focus on getting a lease agreement in Chicago that truly matches your needs as a company.
Disclaimer: We are not a legal firm and are prohibited from providing legal advice to you. The content on this page is not intended to be used as legal advice, or as a substitute for legal advice, nor does it serve as an all-inclusive list of considerations that may affect your business plans. Please consult an attorney that offers their services in your area if you wish to obtain legal advice before signing any lease agreement.