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Business Owner's Manual

Finding Space and Signing a Lease

Once you have an idea of what you're looking for, you can ask people you know or contact a private real estate broker to help you find it. Also, there are public resources in each borough to help you identify suitable properties. For more information, use the Services Directory and look under "Locating and Expanding."

A lease is a legal document that can be enforced in court. You should have an attorney review the lease, even if it's a form lease, to make sure you understand exactly what you're agreeing to and to ensure that your interests are protected. Some key issues are discussed below.

 

The Premises

  • Check carefully to make sure that the lease describes exactly what you think you're getting, including, basement, storage areas, parking, security, access, etc.

  • Consider the condition of the premises and determine what needs to be repaired or replaced. You may wish to hire an architect or engineer to conduct an inspection. Determine responsibility for and the cost of repairs. Get a written list and a timetable for everything the landlord agrees to do, and agree on what happens if the repairs are not completed on time.

  • Find out who will have access to your space. Are there common areas through which anyone can pass? How will your areas be secured?

  • Make sure the building meets all legal requirements, including fire and health and safety codes. Check the Certificate of Occupancy ("C of O"), which indicates what kinds of uses are permitted (for example, residential, commercial, manufacturing). If you have questions, call the Real Estate and Land Use Department of the Department of Business Services at 212-696-2442.

    Note: If the C of O does not include your proposed use, determine whether you or your landlord will be responsible for obtaining a new C of O from the NYC Buildings Department. Most small business leases place this responsibility on the landlord, unless the lease is for an entire building.

 

Rent and Services

  • Clarify whether there are any items you will be charged for in addition to the rent — taxes, security deposit, late fees, etc.

  • Find out what services are included in the rent — security, water, snow and trash removal, repairs, utility and heating costs, etc. Make sure you know how these costs will be calculated. For example, if the building has a single meter for electricity and the landlord proposes to assess you a portion of his monthly charge, you should find out how your portion is calculated — by square foot, in terms of load, or in some other fashion. For savings on energy costs, Use the Services Directory and look under "Energy and Technical Assistance."

  • Check whether the services to the building — electricity, telephone, T-1 lines — are adequate for your business needs.

  • Make sure the rent is fair and that you can afford it, taking into account not only the base rent, but the additional charges and the service fees as well.

  • Determine if the rent will increase over time and, if so, what the amount will be in the later years of the lease term. How are the increases ("escalators") calculated — as a fixed percentage or by some other method?

 

The Term of Lease and Permitted Uses

  • Determine the length of the lease and make sure it suits your needs. What happens if you want to get out of the lease early? Can you sublet or assign? Do you have a right to renew? On what terms?

  • Clarify whether the lease imposes any limitations on how you use the premises. Will there be any problems if your business grows or changes?

 

Improvements

  • Determine whether and on what conditions you will be entitled to make improvements to the property. Are structural changes (walls, roof) included? Will the landlord have to approve your plans? What are the procedures for approval? What happens to your investment when you leave?

  • Make sure the lease is long enough for you to recoup your investment should you make significant improvements.

    Note:  Remember, the plans for many alterations and improvements must be approved by the Buildings Department before you begin work. Then you must get building permits from one or more of the following agencies: Buildings Department, Department of Environmental Protection, Fire Department (for more information on these agencies, check New York City's Web site).

Remember, most terms in a lease are subject to negotiation. If you can't negotiate what you want, look elsewhere!

If you do reach an agreement, make sure all the terms are in writing.