Moving to a new office? Congratulation…

We are all facing cold sweat recalling the last time we moved to a new office…so many issues to take care of.

Few points in the financial aspect that we must pay attention to-

Space and Leasehold Improvements

What is the office size – make sure it meets the current and expected future needs to be aligned with the HC growth/ability to expand.

Improvements or/and alterations clause – ensure it is optional and the landlord’s consent won’t be unreasonably withheld, delayed, or conditioned.

Shopping on lease rates

Determine the budget spend needed. Basic rent price vs. other fixed/variable costs such as management fees, public area, insurance etc. and the relative space measurement per each cost. 

Rent escalation clause – try to negotiate a predetermined fixed increase or/and put a cap, for the option period (see in the next paragraph). price should be determine/linked to the Company’s operational currency (e.g. USD or NIS). 

Length of lease term

As the Company’s needs may be changed, aim to a shorter-term lease with renewal options (usually 2-years with 2-years renewal option) to ensure we are not locked into a lease that is too small/ big, or the price is above-market. 

“Location, location location” 

Make sure the location is aligned with the company’s vision, market strategic, employees’ needs (e.g. commute time, access to public transportation).

Assignment and sub-lease clause 

Allow enough flexibility in case of mergers, reorganizations and share ownership changes. (e.g. a change of more than 50% of landlord’s ownership will be deemed an assignment that is prohibited w/o landlord’s prior approval). 

Parking 

Any parking options at the building or around it.

Other commercial terms

Guarantee – avoid the need for any personal guarantee. Bank guarantee with a minimum pledge deposit as possible.

Leasehold improvements – who pay for move-in leasehold improvements, to seek the landlord’s partial participation, and there will be no fines or need to reclaim

Repair, maintenance costs – make sure it is specifically and reasonably defined what costs are covered under the management fees. 

Other termination terms:

A clause on restore the premises to its original condition at the end of the period  “as is” excluding ordinary wear and tear.

Reduce the landlord right to terminate the lease at its own discretion. The landlord may terminate the lease only if the tenant is in significant violation of the terms of the agreement or has broken the law.

Other:

Acoustics condition in the office.

Any public area to be used for large conference/events

Landlord’s policy around pets’ friendly.

Have questions? Please feel free to contact us for advice…

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