Broker commercial insurance louisiana mortgage

Beau Box knows he will soon get a call from the owners of a small Baton Rouge business asking what they think is an innocuous question. His answer may be devastating.

Box knows this because, as a commercial real estate broker for Latter & Blum, he hears it all the time. "People call me and say they need 3,000 square feet because their lease expires in 30 days," Box says.

His answer often is that they are stuck where they are because they missed the deadline to inform their landlord of their intention to move.

"They associate moving out of office space a lot of times with moving out of an apartment, but it's totally different," Box says.

Starting an office space search too late is a common mistake, but there are other perilous pitfalls small businesses face when negotiating a lease.

Box and three other veterans of the local commercial real estate offer eight crucial steps, questions and issues that, if handled properly, can elevate your next office lease from a prison sentence to a living document that helps your business thrive.

1. Read it.

Office lease language is unfriendly to the reader, and the details are tedious. But business owners should know precisely what is expected of them, including dates and anniversaries that trigger deadlines.

Reading the lease cover to cover should be the first step before even thinking about looking for new offices. Can a business owner even move in the time frame they want? What kind of notice must he give the landlord, and how must he give it? Probably in writing, and possibly through the mail, points out Box.

Even telling the landlord in person may not be enough. "The lease may say the tenant must send the notice via registered mail or Federal Express or fax." An exhaustive search for new office space can prove a big waste of time if the current lease cannot be broken.

2. Consult the right professionals

The phone book is full of lawyers and real estate professionals, but what small businesses need are people who specialize in the local office and commercial space market.

[ILLUSTRATION OMITTED]

The family lawyer who lives across the street may not have enough experience to keep an office lease free of booby traps that can clobber a small business.

"I get people all the time who walk into closing with their neighbor who's a personal injury lawyer or a residential agent, but they never get anything done," says Box.

Mark Hebert, a commercial real estate agent with Kurz & Hebert, says hiring the right professionals is hands down the most important step a small business owner can take. Whether a CPA, a real estate agent or an attorney, each should have experience in the local commercial market.

"If you're not working with professional that understands the market-place, you're leaving the money on the table," Hebert says.

And if they're really good, they'll pay for themselves--literally.

"A good consultant can negotiate for the landlord to pay the fee of the broker," Hebert says.

3. Do not disturb

Under the heading "real estate jargon and minutiae," there's an arcane phrase: non-disturbance and attornment. It just might be the most important phrase in the entire lease.

That provision protects tenants from circumstances over which they have no control. Say, for example, the landlord falls behind on the mortgage of the building and the bank forecloses on it.

Unless your lease includes a non-disturbance and attornment clause, the bank could kick you out and install new tenants, which in the 1980s happened a lot, says Hebert.

Getting a non-disturbance and attornment clause probably will require extra work and will boost the fees up front. A lawyer must draft a separate document to be signed by the landlord's lender and the landlord. But it's always a base worth covering.

4. Get the ball rolling early

Finding the right commercial space is nothing like renting an apartment. It takes months to do properly, says Box. He recommends beginning the process at least six months, preferably nine, before the desired move date.

Finding the right space for your business may take months. It's going to be your address for at least five years, so location is vital.

But even if you already have your eye on the perfect spot, a move will be months away even if everything goes smoothly. Box says 90 percent of office leases require improvements to the space, and the takes time.

Merely getting a permit in hand takes six to eight weeks. Architectural drawings can take three weeks, and another six weeks are needed to get approvals from the fire marshal and city-parish inspectors. Inaction can inadvertently trigger a lease extension.

"In the fifth year they'll call me in the 59th month looking for space, but a lot of people's landlords will tell them, 'No, you're not moving, you must stay five more years,'" Box says. "Don't wait. Get the ball rolling six to nine months before the current lease expires."

5. Write it, don't say it

What your landlord promises you verbally has all the legal weight of a mosquito in the state of Louisiana. In Louisiana real estate law, if it's not in writing, it doesn't matter.

Leases are laden with requirements for tenants, but they also should include every promise made by the landlord.

"In Louisiana, nothing is binding in real estate unless it's in writing and signed by both parties," says Box.

6. Make sure the lease is flexible

Flexibility is perhaps the most important underlying objective for an office lease, and there are several ways to do it, says Macon Callicott, a brokerage and leasing agent with Property One Inc.

Callicott represents landlords, but says it's in the best interest of both tenants and landlords to make sure the lease does not hem a business in.

"Within the four corners of the document they need to have the ability to control their future, whether they shrink or grow, but particularly if they expect rapid growth."

That is particularly important for a new business.

"Let's say you go into an office building or a tech park and you put clauses in the lease that allow the business to expand," he says. "But if they can't expand, then they have the right to cancel. This is important to a start-up business because they won't know what's going to happen."

The same goes for a business that experiences a slowdown. A lease can contain a date certain on which the tenant can give up a portion of his space to avoid having to move.

Another key for flexibility is time. An office lease typically will be for five years, with one or more five-year extension options. Negotiating the details of those options up front, including future rental rates, is crucial. The more options tacked on to a lease, the more negotiating power a small business has.

7. Negotiate or pay

A lease is much more than how much space you get at what rate. A poorly negotiated office lease can be riddled with hidden expenses that can hamstring a business.

Usually the tenant must bear the expense of improving or remodeling the space. But in some cases, when the improvement will add lasting value to the building, the small business can convince the landlord to lower the rent or assume other responsibilities normally shouldered by the tenant.

[ILLUSTRATION OMITTED]

"Renovation is negotiable," says Ben Skillman of Skillman Real Estate. "When you move into a new building, the new business would have to take care of the cost. But if it's an older building, then you can share the cost with the landlord."

Who pays to keep up the parking lot? What will the landlord fix, and what will the tenant be expected to maintain? Those are crucial questions that should all be spelled out in the lease, Skillman says.

There is also room to negotiate how rental increases are calculated. Tenants should expect to pay increases of 2 percent to 3 percent per year to keep pace with inflation. But tenants can negotiate the rent that will be charged should they opt to extend their lease, since that will save a landlord the expense and trouble of having to find a new tenant.

Tenants should negotiate terms to ensure the space continues to meet their needs, and a well-negotiated lease will give tenants the leverage to press landlords to maintain the space properly. On the other hand, tenants must understand their responsibilities and should budget for those possible expenses.

8. Ask and you might receive

What if your small business overextends itself and commits to a space that's too expensive or too large? Your options are to shut down or find cheaper digs, right?

There's a third option many small businesses overlook: ask the landlord to give you a break. Some landlords would rather give a tenant a few months rent-free to survive a slow period rather than go out and find a new one.