What is a Commercial Leasehold Inducement?
2 min read
Canada's commercial real estate market is often unpredictable as it relies on various market factors to determine its success. If supply is higher than demand, landlords or property owners offer potential tenants an incentive to lease their property.
Commercial leasehold inducements are a common way to attract tenants. Inducements can include but are not limited to;
Offer a rent-free period or a rent reduction
Offer an interest-free or low-interest loan
Offer to pay for leasehold improvements
These types of incentives are beneficial in a commercial lease agreement because it shows a level of diplomacy from the landlord—however, they are not a mandatory inclusion. When negotiating your commercial lease agreement, you must consider what your business would benefit from the most when moving into the space. It is also important to note that most commercial leasehold inducements could be regarded as taxable income. As a lessee, you must thoroughly understand the potential tax benefits and/or tax costs of leasehold inducements before signing the lease.
Understanding the benefits and potential drawbacks of leasehold inducements will help you effectively negotiate your subsequent commercial lease agreement. Knowing what is negotiable during the negotiation process will give you the upper hand, helping you protect your business.
Reference
Scheck, E. (2021, February 17). What is a commercial leasehold inducement? Hogg, Shain & Scheck. Retrieved July 19, 2022, from https://www.hss-ca.com/tax-accounting/what-is-a-commercial-leasehold-inducement/
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