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Should you give all of your business tenants the same lease?

| Jul 17, 2018 | Uncategorized |

Some commercial landlords rent out space to just one or two businesses, while others have many tenants. Of course, whether you have two tenants or 20, you might wonder if you should present all of your tenants with the same lease, meaning each signs a lease with the same terms (other than rent amounts, perhaps), expectations, penalties and so on. This can seem appealing because you would know each lease inside out, and it would streamline many processes.

However, a one-size-fits-all approach often does not work in business, and this is true when it comes to commercial leases.

Retain your flexibility

First, you probably want the ability to attract a diverse range of tenants to manage your risk. For instance, if you own a strip mall with five retail spaces, you might sign leases with an educational supplies company, a hairstylist, a pizza parlor, a flower shop and a computer repair business. They are in different fields, so no matter what the economy does, you should be able to collect rent on time from most or all of your tenants.

However, each tenant comes with different pros and cons for you. Perhaps you have wanted a computer repair business in your mall for some time, and a more favorable lease in which you pay for some renovations would get the tenant to sign with you. Similarly, maybe you have not been looking to have a flower shop, but the shop’s owners offered to sign a three-year lease and to pay for certain repairs. You retain your flexibility and ability to make agile business moves if you have the mindset that each tenant is different, and that starts with customizing each lease for each tenant.

Know your space

Another reason why offering the same lease for years might backfire: Spaces change due to repairs, remodels and other issues. Thus, you could have a space that has become much more attractive to tenants and that you could be charging more rent for. However, if you are in the mindset that this space rents for $1,000 a month, you might never see it as worth $1,500.

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