The Last Minute Gotcha!

By Lynn Drake
Compass Commercial

Your business is doing well and you are happy with your current landlord. You may or may notice that your lease is expiring in less than a year. You might think the landlord forgot. I guarantee this is not the case. You might think the landlord is going to allow you to go month to month! They probably will as you will most likely being paying significant hold over fees. What you ask is a holdover fee? 99% of all leases I’ve ever reviewed have a holdover fee of 125% to 200% or more. Which means on a lease that is for $1,000 a month if you stay even one day past your expiration date then you will pay $1,250 for the entire month. If you have a 200% hold over fee that is $2,000. Most leases don’t prorate holdover fees so a day can cost you more than an entire month’s rent. Read the fine print.

Some landlords will contact you just a month before your lease expires and offer you a renewal option. Most likely this rate will be over market. They tell you sure go ahead and move, but don’t forget you have hold over fees. This is the last minute gotcha!!!!

To avoid the “gotcha” pull out your lease right now. Find the expiration date and put a note on your calendar 6 months before the lease expires if you have under 5,000 square feet of office. If your firm’s space is bigger put the reminder between 9 months and a year. You will be glad you did when it comes time to renegotiate. While you have that lease out see if you have any renewal options. If you do determine when they are due and put a note on your calendar. Then put another reminder 3 months before that time so you have time to think about whether or not you want to renew. When working with a tenant we always take the tenant out to market for a couple of reasons. Sometimes tenants simply don’t know what they don’t know. Seeing other options can help them make better decisions. The main reason we do this is it shows the landlord you are serious about cutting your costs. If the landlord thinks you will relocate they are usually more aggressive with their rental rates. After all it is better to have a few extra dollars in your pocket than in the landlord’s pocket. Don’t forget to check your lease!

Lynn Drake is president of Compass Commercial in Troy, Mich., representing office and industrial tenants. Learn more by visiting www.compass-commercial.com or calling (248) 341-2410.