Most “form” leases provide that the tenant can’t make any alterations or improvements to the premises without the landlord’s consent. Those provisions are typically too restrictive and you should attempt to negotiate changes. For example, try to get the right to make non-structural changes or changes costing less than $2500 without the need to obtain the landlord’s consent.

Before you can occupy the space, the premises may need some improvements or alterations to make it appropriate for your business needs. Here are some key questions to ask about the initial tenant improvements and alterations:

• What is the scope of the desired changes?
• What is the cost?
• How much time is needed to complete the improvements?
• What permits or approvals will be necessary?
• Will the landlord contribute to the payment for the improvements?
• Who will own the improvements once the lease is terminated?

Propose a clause stating that you are allowed to remove any trade fixtures and alterations that you pay for, provided that you repair any damages to the premises.

If you anticipate the need to make alterations or improvements in the future, the lease should provide that you may make them with the landlord’s consent, but that the consent won’t be unreasonably withheld or delayed.

Also, beware of a clause that states that at the end of the lease you have to return the premises in their original condition. Try to negotiate a clause that states the following:

• The premises will be returned to the Landlord at the end of the tenancy in the same condition as at the beginning of the tenancy, excluding:

1. 1. Ordinary wear and tear
   2. Damage by fire and unavoidable casualty not the fault of the Tenant
   3. Alterations previously approved by the Landlord.

Fixed rent over long-term leases is relatively rare, because it is to the advantage of landlords to build in rent escalation provisions.

Sometimes, landlords insist on annual increases based upon the percentage increases in the Consumer Price Index (CPI). If you are confronted with such a request, do two things. First, attempt to arrange that the increase does not kick in for at least 2 years. Second, propose a cap on the amount of each year’s increase (for example, no more than a 3 percent increase in any year). Here is a sample clause for doing that:

Any rent increases under this Lease shall commence no earlier than two (2) years after the date of the commencement of this Lease. The maximum amount that the rent may be increased in any one year (starting in the third year of this Lease) shall be 3% over the beginning base rent under this Lease.”

If you have to live with a rent escalation clause, consider a predetermined fixed amount—for example:

• $2,000 a month for the first year
• $2,200 a month for the second year
• $2,400 a month thereafter

Such a provision gives you more predictability in planning your business. Make sure that your business plan projections adequately reflect such increases.

Tenant Representation Flo Chart by Michael Coretz