How to Raise the Rent on a Commercial Business in Illinois

You can negotiate almost everything in a commercial lease.

Commercial businesses always prefer to pay the lowest amount of rent possible. As a property owner, however, you are responsible for property taxes as well as maintenance costs and general upkeep of the property. If the business renting your property becomes very successful, it will likely raise the value of your property. This means you'll have to pay more in property taxes, and you need some way to pass this cost on to the tenant. It all comes down to the lease terms. According to Allbusiness.com, even as a new landlord taking over an established property, you will have to honor the terms of the ongoing lease even if the rent amount does not cover your expenses.

Things You'll Need

• Commercial lease agreement

Instructions

1. Check the lease agreement. The lease agreement will determine whether you can raise the rent price and by how much. Some lease agreements have a clause prohibiting rental price hikes. Some terms specify a base rent amount plus a percentage of the monthly business revenue. In this case, the rent amount would vary from month to month. According to businesslawchicago.com, almost everything in a lease agreement is negotiable. In big Illinois cities such as Chicago, the lease agreements will vary greatly depending on the reputation of the neighborhood and foot and vehicle traffic. It is common for lease agreements to last for at least one year.

2. Speak to the tenant. Often you can negotiate a fair rental price with the tenant by considering the status of his business. A new business may be looking to establish itself in the area and will benefit from low rent for the first few months. By checking the status of the business, you can better gauge whether the owner can afford higher rent and by how much. If the business is making high profits, and is in a good location in Illinois, then you can easily justify a rent increase. However, remember that the increase should not violate any terms already established in lease agreement. For example, if your tenant operates a successful lawyer's office downtown Chicago, and you negotiated a set rental amount for one year, you cannot raise the rent until the year is over. If the lawyer's office is in a much smaller city, such as Bloomington, be aware that a rental increase may hinder the ongoing success of the office, and the tenant may relocate with ease without losing clients.

3. Create a new lease agreement. Any new rental increase should come in the form of a new agreement. Consult with an attorney to ensure that all the terms are clear and understood by both parties. According to the Illinois Tenants Union, Illinois has no rent control, which means there is no limit to the amount rent can be increased. Notify your tenant of the rent increase at least 30 days in advance. This will give the tenant time to look for another location if he doesn't wish to continue renting from you. It will also give you time to find a new tenant.

References

• Business Law Chicago: Commercial Leases
• All Business: Raising the Rent of Your Rental Properties
• Illinois Tenants Union