5 REASONS YOU NEED AN ATTORNEY TO REVIEW AND NEGOTIATE YOUR COMMERCIAL LEASE.
There are many complex legal issues that can arise when negotiating a commercial lease, whether it be a lease for office, retail, warehouse or industrial space. Here are five reasons why you need to consult an attorney when leasing commercial space.
1. Commercial Leases are Favorable to Landlords.
Commercial leases are drafted by the landlord, or by the landlord’s attorney, so the terms of the lease will always favor the landlord. An experienced attorney will be able to quickly identify potential issues and pitfalls within lease provisions and determine what terms should be modified or added to provide the appropriate and best protection for the tenant.
2. Accuracy Is Important.
Often the landlord will use a prior lease as a draft for a new lease and will not properly change all the information to reflect the terms agreed upon for the new lease. It is not uncommon for negotiated terms from a prior transaction to be included in the new lease, and often times these prior negotiated terms are irrelevant to the transaction or are harmful to tenant in that they impose unexpected obligations or limitations on tenant. An experienced attorney will be able to spot these terms and have them taken out or modified to reflect the agreed upon terms of the transaction.
3. A Personal Guaranty Provides Access to Your Personal Assets.
A personal guaranty eliminates the protection a tenant’s business entity provides to its owners. Personal guaranty terms are sometimes buried in the lease so that they are not that recognizable, and many times tenants don’t realize that they are exposing their personal assets to the liabilities of their company under the lease. Other times there are so many subjective conditions imposed to avoid personal liability, that the principals of the tenant are going to face personal liability for the lease obligations. An experienced attorney can identify these provisions, and eliminate or limit the personal liability they provide for, or at the very least, inform the tenant of such liability and advise as to how to best protect themselves.
4. Excessive Common Area Maintenance Fees (CAM Charges).
CAM charges are fees that are paid by the tenant in addition to any monthly rent. All tenants of a commercial building share in the cost to maintain the common area of the building, for example, the striping of the parking lot, the landscaping, the lighting, and the security. The formulas and terminology that are the basis for calculating such charges can be very confusing. In addition, sometimes landlords try to pass on charges that shouldn’t be paid the tenants. An experienced attorney will understand the formula and terminology being used and identify the inappropriate charges and have them eliminated.
5. Sublease and Assignment Provisions are Crucial.
It is always important for the lease to allow the tenant to sublease or assign the lease should the tenant’s business or economic conditions change. For example, if a tenant’s business grows so that the space is no longer adequate to operate tenant’s business or, in the alternative, if tenant’s business shrinks or fails and tenant no longer needs the space or is no longer able to keep paying the rent for the space. The availability of the right to sublet or assign the Lease is critical. Many times Landlords will try to prohibit the sublease or assignment of the lease by tenant or charge additional fees in connection with even considering or allowing a sublease or assignment of the lease. An experienced attorney is best able to negotiate appropriate and customary language which will give the tenant the most flexibility under different business, financial and economic scenarios.
Commercial leases can be complicated, and there are many issues in addition to those listed above, which need to be addressed. An engaging experience and attorney can help avoid potential problems by recommending additional provisions to be added to the lease and clarifying ambiguous language. If you are considering leasing commercial space, we would be happy to assist you.
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