You’re leasing your first commercial space

The problem

A first commercial lease is a big commitment for a new business. Common surprises: a personal guarantee you didn’t need to give in full, additional rent that nearly doubles the monthly cost, a use clause that doesn’t quite cover what you do, or a build-out that costs much more than expected.

What I do about it

I help you work out what you can really afford, find spaces that suit the business, and explain every term in plain words. I negotiate a sensible length, a limit on the personal guarantee where possible, free rent for the build-out, and the right to assign if you sell later.

What your landlord wants

With a new business, a landlord’s main worry is risk: will the rent get paid? They look for a solid plan, some financial strength and someone who’ll look after the space.

Where everybody wins

Show the landlord a credible plan and they can take a chance on you with less security. You get a fair start and a lease that won’t sink the business if things change.

First-lease surprises

• Rent is quoted per square foot per year, usually net. The monthly bill is higher than the ad suggests once additional rent and GST are added. Try the lease calculator.
• Landlords often want a personal guarantee from a new business. Its size and length are negotiable.
• A deposit of a few months’ rent is common.
• Your use has to be allowed by zoning, and many businesses need permits and a business licence before opening. Food uses add venting, grease traps and health permits.
• The space is often leased as is. Who pays for what in the build-out is part of the negotiation.

What we negotiate

• A fixturing period (time to build out before rent starts) and free rent.
• A tenant improvement allowance if the space needs work.
• A term that fits your business plan, with renewal options so a good location stays yours.
• Assignment rights so you can sell the business one day.
• A limited personal guarantee, capped or reduced over time.
• Conditions in the offer to lease so you can check permits and financing before you’re committed.

Micro leases

Small spaces, short terms and shared setups are a great way to start. I like these deals, and I’m happy to help with small spaces. Have a look at micro leases.

Before you sign: four things first-time tenants miss

• Ask when the last building permit was pulled. When you apply for a permit to build out your space, the City can require parts of it to be brought up to current code. In older space that hasn’t been touched in years, that often means electrical and lighting upgrades, and the cost can land on you. Ask the landlord before you sign and get the answer in writing.
• New space or second-generation space. New space is usually left unfinished. The landlord offers either a work letter (a list of what they’ll install, such as doors, outlets and lighting) or a dollar allowance. Second-generation space has had a tenant before and may suit you as it is. Either way, list what your business needs, compare it with what’s on offer, and negotiate the gap before you sign.
• There’s no rent cap for business leases. Commercial tenancies aren’t covered by the Residential Tenancy Act, so your protection is what the lease says. A month-to-month tenancy is weak: the landlord can end it with proper notice and offer a new lease at a higher rent. If the location matters, get a fixed term and renewal options.
• Leases over three years and title. Under the Land Title Act, an unregistered lease of three years or less (including renewals) still binds a new owner if you’re in the space. A longer lease generally has to be registered on title to protect you if the building sells. Ask your lawyer whether to register yours.

How I approach any space

• Use comes first. How you’ll use the space decides most of what you need: power, doors, ceiling height, drains, parking and fire protection.
• Look across property types. A clinic can work in a retail strip, and most industrial units include an office.
• Compare total cost. A lower rent stops being low once you add the load factor, common area charges, after-hours HVAC and parking. Get the full cost of every option in writing.
• Bring experts in early: an electrician for power, a space planner for layout and measurement, an environmental consultant where it matters, and an insurance broker for premiums.
• Use a written checklist on every tour, so nothing gets missed and no answers have to be chased later.

Before you tour, read the touring checklist. Before you sign, see tenant improvements and commercial lease rules in BC.

Questions people ask

How much does it cost to lease a small commercial space in Vancouver?

It depends heavily on the area, size and building. To compare, add base rent and additional rent per square foot, multiply by the rentable area, divide by 12 and add GST. The lease calculator on this site does the math.

Do I need a personal guarantee for my first lease?

Landlords often ask new businesses for one. You can negotiate its size, cap it at a number of months of rent, or have it reduce after a period of on-time payments.