You’ve found the perfect office space. It sits in the ideal neighborhood for your business, one with easy access to major roadways and a large amount of foot traffic. The space is large enough to accommodate your business’ planned future growth, but not too large so that you’re paying for space that you’ll never need.
Best of all, your new landlord has quoted you an affordable monthly rent, one that fits comfortably within your budget.
Be careful, though. That monthly rent might not be as low as it seems. Too many tenants make the mistake of overlooking the hidden costs that can come with a new office lease.
And those costs can add up, breaking even the most successful business’ budget.
Here are some of the most common hidden costs that business owners overlook when signing an office lease. Be on the lookout for them to make sure that you don’t put your business in a financial hole.
Someone has to plow your building’s parking lots during the winter. Someone has to cut the grass and repave cracking driveways. And someone has to pay for these services, too.
Who pays and how much should be included in your office lease. Some leases might state that the building owner is responsible for covering these maintenance costs. Others will spell out a payment structure shared by the building’s owner and its tenants. If you don’t notice the monthly maintenance fees that come with your new office, you run the risk of blowing your business’ monthly budget.
What if your office building needs a new sprinkler system? What if the bathrooms need an overhaul to meet the requirements of the Americans with Disabilities Act?
Again, someone has to pay for these upgrades. Depending on your lease, you might be at least partially responsible for them. Again, it’s important to understand this before you sign the lease. Building upgrades are rarely cheap, and they can place a significant burden on your business’ monthly expenses.
Some office leases contain clauses giving building owners the right to conduct an electrical survey of your office. During such a survey, contractors will chart how much electricity your office actually uses. Your landlord can then factor this usage into the amount you pay each much for electricity.
Be warned, though, some electrical surveying firms will figure the total amount of electricity that your office would consume each month if every piece of equipment – all your computers, lights and copy machines – were running all full capacity. This will result in a higher monthly electrical usage than is realistic, and could unnecessarily boost your monthly utility bills.
If you have a growing business, you might not expect to stay in your new office space for too long. Be careful, though, of pre-existing condition clauses. These clauses state that you must return your office space to its original condition after you vacate it.
In other words, you’ll have to remove any new walls you’ve installed or any new lighting. You’ll have to return your now bright-red office walls to their former dull beige.
All of this costs money, and can significantly add to your business’ expenses when it’s time to move to a new office.
Operating expense increases
Most office leases will include clauses giving landlords the right to increase your monthly rent by a certain percentage each year. In theory, your landlord might have to pay more each year to maintain your building as the costs of labor, equipment and materials rise. The annual rent increases help your landlords cover this expense.
Make sure that your lease doesn’t allow your landlord the ability to raise your monthly rent by a large percentage each year. That can quickly turn your once-affordable space into a financial burden.
Depending on your lease type, you might have to pay a portion of your office building’s property taxes. Make sure that you’re not paying too much. Ideally, the amount of money you pay for property taxes should be directly related to how much of the office building that you occupy.