Lease w/ An Option vs. Long Term Lease PDF Print E-mail

Every once in a while I will be asked about this in the course of setting up a lease.  The answer is “it depends”.  There are a few questions that you need to ask yourself when determining the length of your lease.  The first thing you need to know is some of the pros and cons of each.

Long Term

Pros:
  • Price for rent locked in and easy to budget
  • Secure, you will not need to move
Cons:
  • Stuck with that price
  • Stuck with that Landlord

Short Term w/ Options

Pros:
  • Easy to determine If location is right for your business without long-term commitment
  • Easy to determine if level of service is adequate without long-term commitment
Cons:
  • Time goes by fast.
  • Higher Rates

As a general rule a short term with options allows your business to be more adaptable and take advantage of a changing market.  A lot of your choice also comes down to the cost of moving your business.  Do you have heavy equipment, do clients come and see you, is zoning an issue for your type of business?  As an example, if you have a mobile car washing company and you have a storage warehouse for your trucks and supplies you can move easily so a short term would be good for you.  If you are a manufacturer with heavy equipment the cost to move is too high and you need to lock down your overhead for as long as you can.

One of the things I have seen over the past two years in this down turn is that the opportunity to change the size of your space to fit your current demand, in place (without having to move), has incredible value.  If you are in a building that allows you to take, or give up, space it allows you to adjust your overhead to weather the hard times but still expand to be able to take advantage of the good times.  This is even more important if you are looking at finally purchasing your own building.  Make sure it can be easily divisible so you can downsize, add renters, and avoid being crushed by your mortgage in a down economy.  Just make sure you only rent to them on a short term.

 

Last Updated on Tuesday, 24 May 2011 22:08