Deciding where your team will work is an exciting step for a lot of startups, but it can also be intimidating—after all, workplace environments are integral to company growth and development. But renting an office space is more difficult than we assume (news flash: it’s not like renting an apartment). Besides the fun stuff, like lighting, design, location and amenities, you also need to consider the practical elements: insurance, terms, leases and subleases. Don’t panic! This article will provide you with the pro tips you need to navigate the legal mumbo-jumbo with ease—consider this a crash course on how to safely secure your dream office.
1. Identify your total upfront costs
Don’t get carried away with your monthly budget before considering your upfront costs. In addition to furniture, technology, phones, WiFi and the all-important coffee machine, you need to budget for potential renovations, tenants insurance and parking. There may also be costs associated with your broker and/or real estate lawyer.
The takeaway: Estimate big-picture costs, and ensure you have sufficient resources before touring every available office space in town.
2. Consider the growth potential
Like you would when shopping for a house or apartment, make a list of must-haves and nice-to-haves. It’s likely you won’t be able to afford everything you need (or want), so it’s necessary to prioritize. Identify how much square footage you need—you can’t complete this search without it—and decide how many meeting spaces are necessary. If you want to double your sales team in the next year, then a one-year lease in a small, open-concept office probably isn’t going to work out very well.
You also need to consider projected company growth and weigh it against your current budget. If you’re still in startup mode, you need a space that will grow with the company—without breaking the bank.
The takeaway: Don’t focus solely on what you need right now; rather, determine what you’ll need from an office months or a year down the road.
3. Get your paperwork in order
You don’t want to leave anything to chance when committing to an office space. Check your landlord’s ownership documents: Is the space legally zoned for your business use? Have the building’s various safety codes been met? You should also check your own paperwork. Business structures will be referenced in your lease, so it’s best to confirm that your official documents (e.g. Articles of Incorporation or Articles of Organization) and business licenses are up to snuff.
The takeaway: Landlords and brokers will definitely read the fine print, so you should too! Being aware of everything in your paperwork will help prevent misunderstandings between parties.
4. Negotiate (and record) your terms
It’s likely that your landlord is using some sort of template to negotiate the terms of your lease. It’s necessary—and expected—that you negotiate these terms to fit your needs. And it’s not just negotiations on price that are important! Subleasing, flexibility, even what you bring into the space (like that foosball table you’ve always wanted) should be included in your paperwork. You should also negotiate whether or not a personal guarantee (or security deposit) is necessary. We’ve all had nightmares about being held financially responsible when a business tanks—some people are forced to make payments for years after the fact. If you play your cards right, you may be able to get away with providing a guarantee for only a portion of the lease, as opposed to the full lease.
The takeaway: Never assume anything—make sure all the details you’ve discussed are written explicitly in the document, including anything that was agreed upon in your negotiations.
5. Mind the contract verbiage
A commercial real estate lease is obviously not the most exciting bedtime read, but it’s essential that you understand the entire agreement. Watch out for ambiguity in language (brokers will throw in all types of jargon) and make sure to ask questions if there are sections you don’t understand. What are your rights in the event of an emergency, like a flood? Who is responsible for repairs? What utilities are included and which are your responsibility?
Some contracts may also state that you’re responsible for a certain percentage of common area maintenance or capital expenditures, so make sure you understand those responsibilities (do you want to be the one in charge of fixing the roof?).
The takeaway: There’s no shame in meticulously combing through the details. It’s typical for contracts to go through several rounds of revisions until both parties are happy with the terms, so be patient!
6. Commit to extensive insurance
As a company, you probably already have more types of insurance than you even knew existed, but now that you’re looking for an office space, you’ll have to add a few more. Not only do you need to insure the space itself and your contents within the space (be sure to read the fine print regarding theft—this often isn’t included in low-cost contents insurance), you also need to consider general liability insurance within your office. Accidents happen, and liability insurance will protect you in case someone is hurt or injured on the premises.
The takeaway: Cover all your bases. Proper insurance may have steep, upfront costs, but it’ll save you money in the long run.