The Lease You Can Do.

• Author: Spendlove, Gretta
• Position: Brief Article

Advice to start-ups on negotiating a lease

During my first semester in law school, a friend described the cycle of high hopes and abject despair through which we all circled: "One moment, you expect to make law review, and the next, you're afraid you'll flunk out." I often think of that comment, as I watch start-up companies try to plan simultaneously for high growth or failure.

One legal task most start-ups share is negotiating a lease. Following are a few tips for obtaining a lease whether your business is headed for the Fortune 500 or bankruptcy court.

Try for short lease terms with options to extend, and first rights of refusal. If you make it big, you'll need all the space you leased and more, for a long time. If you falter, you'll want to get out, the faster the better. Short lease terms with options to extend build flexibility into a lease. First rights of refusal allow you to buy the building or lease the space yourself, if the landlord offers it to someone else.

Make sure the lease is assignable. You may want to move before your lease term is up, either because you need more and better space or because you can't afford what you have. If the lease does not prohibit transfer, or "assignment," you can sublease the space and go, although you will still be liable for rent if your sublessee falls to pay. If the lease does prohibit transfer, try to add a clause stating that consent to assignment will not be unreasonably withheld.

Make sure you have access and adequate parking. I was the lawyer for a small restaurant in a shopping center being renovated. The parking lot was torn up for months making it difficult to get to the restaurant. The lease said nothing about adequacy of access or parking. The restaurant went out of business and it was tough to collect damages...