The Downside of Month-To-Month Leases

People ask me frequently if they can get a month-to-month lease. For new tenants, the answer is generally “no,” unless you’re willing to pay twice the monthly rent for that space. If you have an event and are looking for a daily rate, that’s not a proposition owners are generally willing to take. You can sweeten the deal to get them interested, but you need to do so early in the conversation.

First of all, owners don’t really retain commercial real estate agents to bring them short term leases. Owners have been known to get a tad irritated when their agents bring them small offers that can actually interfere with them getting the space leased on a longer-term basis.

Now, for the real thing you need to think about. Literally, if you have a month-to-month lease; so does the owner. So, although you may like keeping your options open, you can be kicked out of that space with a month’s notice. So whatever upgrades you’ve done, whatever stationary you’ve paid for, whatever advertising you’ve paid for, whatever costs you’ve incurred to drive your clients to that location – all of those costs are at risk.

Case in point – I represent properties, like all commercial real estate agents at the moment, that are for sale. Should the owner sale the property and you’re on a month-to-month lease, you can be told to vacate. I received a call from a long term tenant at a building that was sold. She had been there so long, she didn’t appear to worry about renewing the lease any more. Thing is, she has a significant loan still outstanding for the tenant improvements in her space and all her advertising was aimed developing her practice at that location. Years of hard work went into her practice and lots of financial resources went into building her space into the perfect space for her practice. Rumor has it that building has been sold to make room for a national pharmacy store chain. It’s a sad story, but don’t become complacent about making sure you have a firm lease.

Let me repeat, if you have a short term lease, so does the building owner and you can be evicted without much notice. Make sure you’re lease strategy matches your business strategy.

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