March 8th, 2013, By Don Catalano
If you’ve already signed your lease, you might have missed some common lease terms that can be disadvantageous to corporate real estate tenants. Here are a few things to check for in review of existing agreements or new leases that you sign moving forward:
Many leases are not clear as to exactly what you are renting. Make sure that your lease clearly defines your space, its size, and whether the size is on a rentable or usable basis. If your lease refers only to your usable space, research who pays for the loss factor.
While it’s completely reasonable for a lease to require tenants to carry insurance to protect themselves and the owner of the property, some landlords insert unreasonable lease terms to require tenants to buy very high levels of insurance coverage. Review the lease carefully and if it asks your business to take out an unreasonable level of insurance, do what you can to renegotiate it.
Renewal options can be tenant-friendly, but the way that they are drafted can change this very quickly. Ideally, your options should be under your control, meaning that you should have to notify your landlord to renew your space, as opposed to having cancellation options wherein your lease is automatically renewed unless you request otherwise. Also, make sure that the lease terms defining the execution date for your options are clear so that you don’t miss out on being able to take advantage of your options.
Most landlords want their tenants to stay in their buildings for their entire lease term. However, given the fluidity of business, you might find that you need to vacate a space early because you no longer need it or because you outgrow it. Review the lease terms carefully to ensure that you have permission to either sublease your space or assign your lease to another tenant.
When you sign a lease, you enter into a business relationship with your landlord. If they do something that lands them in legal trouble, you could also get dragged into it, and the same could happen to them if you have an issue. It’s completely reasonable for your landlord to insert lease terms that have you indemnify them against anything that you do for which they could be held liable. However, if you’re going to indemnify them, they should also indemnify you. This indemnification will typically come in the form on non-disturbance agreements, and similar clauses.
Including early termination clauses in your lease that specify when you or your landlord can terminate the lease can be a good idea. However, some termination clauses can be very harmful to your interests. For instance, if a landlord inserts a “Termination for Convenience” provision in the lease, they could move your business out of their building under seemingly unreasonable circumstances.
A holdover occurs when you stay in your space beyond your lease’s termination date. If you don’t have lease terms that specify what happens if you need to overstay your lease, you’ll be at your landlord’s mercy, likely paying as much as double or triple the rent of your last payment within the lease. If your lease doesn’t have a holdover clause, work with your landlord to insert one that specifies terms that both you and he find acceptable.