It is essential to fully understand the terms and conditions of any contract you sign if you want to lease office space. This guide will help you understand the key terms and conditions of your lease.

Letter Of Intent (LOI)

The LOI should include the "heads" of the agreement upon which the lease document will be based. If you are not sure that the LOI is valid, don't sign it. Side agreements that are business-based could be legally binding " letter agreements." Before you submit any letter of intent or term sheet to the negotiating side, make sure that an attorney reviews it. Different laws apply to the legally binding nature, such as the LOI, in real estate deals. Consult an attorney if you need to do your research.

Tenant Improvements

In booming markets, where construction costs are increasing rapidly, and contractors are behind schedule, tenants should look for space that is minimally improved. Before you decide to go with an "open plan" design for shell space, make sure that your company is fully understood. Open plans with exposed ceilings and trendy designs can be more expensive than traditional drop-ceiling offices. This is not the best option for team members who require unbroken concentration (i.e., programming).

Tenant Improvement Allowance

This is provided above a "warm shell"? Is the ceiling grid, tiles, light fixtures, and base HVAC included in the base package? Although it's rare for landlords to be able to obtain a turnkey deal (built by the landlord to your specifications), it's worth asking. If the tenant is strong credit and the buildout is not too specialized, a landlord may be willing to consider it. We recommend that clients who lease more than 10,000 square feet hire their own construction manager when working with an allowance.

Common Area Maintenance Charges (CAM)

They are passed directly to tenants in triple-net (NNN) leases to pay for the maintenance of buildings or grounds. Make sure your lease clearly outlines the charges. You will only be charged for actual services or maintenance. Ask for a breakdown of expenses from previous years so that you don't get blindsided by unanticipated charges.

Capital Improvements

Tenants can be subject to the amortized costs of replacing or repairing building components like roofs and HVAC. Landlords are allowed to do this. Ask the landlord whether any of these items are nearing the end of their natural life. If so, you can try to exempt them from your lease for a reasonable time.

Base Year

A full-service or gross lease allows landlords to allow for increases in operating costs beyond those that were included in the first year. This applies to all annual increases in base rent. Hence, steps four through five are important. You could see a dramatic and unexpected increase in your lease costs in the second year if the base year estimates are not accurate.