Ep. 151 Ten Quick Retail Brick and Mortar Lease Tips

One of the most important steps in opening a retail business is signing your lease. 

Whether it’s your first time signing a commercial lease for a brick-and-mortar space or your lease is coming up for renewal, these ten tips will help you navigate this tricky process. 

#1. Real Estate Laws Vary by State. 

Even though this blog post and podcast episode contain helpful information about renewing or signing a lease for your retail space, please note that this is NOT legal advice. 

Real estate laws are different in every state, so you’ll want to do some research on your own. Google is a great place to start so you can educate yourself on renting retail space in your state. 

#2. Hire a Real Estate Attorney to Review Your Lease!

Many of us hear “attorney” and immediately believe that working with one will be cost-prohibitive. Thankfully, this isn’t always the case. 

It shouldn’t cost more than $500 to have a real estate attorney review your lease for you. $500 is a good chunk of change, but it’s worth it! 

A lease is one of the biggest hurdles in getting our stores open. It’s also one of the largest operating expenses aside from our cost of goods. Be sure to invest in making certain things are squared away. 

#3. Commercial Realtors Speak in Yearly Amounts.

When we’re starting our retail businesses, we’re most likely comfortable discussing rent in monthly terms. That’s what we’re used to from renting apartments or paying a mortgage. 

But commercial realtors speak in yearly amounts rather than monthly payments, and that annual number can be scary. Be ready to break it down by month, or start calculating your monthly budget as a yearly number.

#4. Yes, You NEED a Lease!

Just like you NEED a bookkeeper, you NEED a lease. 

You might not feel comfortable with landlords, commercial realtors, or accountants, but you have to overcome that discomfort. These are parts of your business that protect and inform you. Make sure you get a lease in writing.

#5. Have Your Financials in Order.

Whether you’re working directly with the building owner, a property management company, or a commercial realtor, it’s common to show your financials before signing a lease. They want to protect themselves and ensure you can afford the rent.

Have the numbers to back up your request for a lease. Or, have a business plan to show you can make the rent.

#6. Everything is Negotiable!

When you’re negotiating your lease, ask for MORE than you want. Doing this makes negotiating easier! 

You might stand out when you negotiate, as many people are afraid to ask for different terms. It might feel uncomfortable, but that’s okay—negotiating gives you wiggle room, which is worth any discomfort.

#7. Include an Option to Renew or Right of First Refusal Clause.

This clause gives an existing tenant the first opportunity to lease the property again. In cases where you might consider purchasing the building, it gives you the right to be the first one offered the opportunity to buy. 

Whether you’re renting for now or want to buy your space in the future, having this clause protects the potential future of your retail space. 

#8. Know This About Triple Net Leases. 

With triple-net (NNN) leases, you’re paying for shared maintenance, taxes, AND insurance. These leases aren’t necessarily bad—in fact, 25% of Master Shopkeepers members have NNN leases. They’re still profiting and paying themselves!

However, the building owner is going for full profit with a triple-net lease. I want all business owners to make sound financial decisions, but I also want shopkeepers to make a profit, too. 

If a building owner asks for a triple-net lease, have a real estate attorney review it for you and negotiate as much as possible.

#9. Personal Guarantees Are Not Uncommon.

A personal guarantee means that your private real estate, savings, or valuables are on the line if you can’t pay rent or fulfill other obligations as outlined in the lease. 

It’s a smart move on the building owner or management company’s part, as they’ll be able to recoup the rent you’ve committed to. It’s a standard lease clause for retail spaces.

#10. Does Your Spouse Need to Sign the Lease?

Each state has different rules when it comes to property. Some states are common law property states, and some are community property states. 

In community property states, property can’t be individually owned if you’re married. The property is exposed to the liabilities and creditors of both spouses. If renting space in Arizona, California, Idaho, Louisiana, New Mexico, Nevada, Texas, Washington, or Wisconsin, you can expect your spouse to sign the lease with you.

If you’re in any other state, you should be able to rent on your own without your spouse signing the lease. That doesn’t mean landlords won’t ask your spouse to sign, though! Some landlords are stuck in the 1950s and believe women business owners need their husbands to back up the lease. 

Note that community property laws and dower rights are not the same. Only a handful of states have dower rights, but they should only apply to owned real estate rather than leased real estate. 

No matter where you live, be sure to do your research and have an attorney review your lease. That way, you’ll know that what you’re signing is accurate, fair, and legal. And if you’re in Master Shopkeepers, head to the Shopkeeper’s Academy for a more in-depth lesson on common lease clauses and tips to consider.

Resources

• Ep. 77: Yes, You NEED a Bookkeeper
• Explanation of common law vs. community property from The Balanced Money
• Apply to join Master Shopkeepers, the retail training mastermind for brick-and-mortar store owners

Timestamps

• [02:26] #1. Real Estate Laws Vary by State. 
• [02:55] #2. Hire a Real Estate Attorney to Review Your Lease!
• [04:40] #3. Commercial Realtors Speak in Yearly Amounts.
• [05:35] #4. Yes, You NEED a Lease!
• [06:05] #5. Have Your Financials in Order.
• [06:50] #6. Everything is Negotiable!
• [07:28] #7. Include an Option to Renew or Right of First Refusal Clause.
• [08:39] #8. Know This About Triple Net Leases. 
• [10:54] #9. Personal Guarantees Are Not Uncommon.
• [12:28] #10. Does Your Spouse Need to Sign the Lease?