Trying to understand the terms of a commercial property lease can feel like navigating a minefield – there is a lot of new terminology and industry jargon to understand. When it comes to negotiating, some landlords may try to pass off a lease document as “a standard lease” that all tenants must sign. In many cases, uninformed tenants could end up agreeing to terms that are less than favorable, which in fact are not standard policy. Be careful with the following clauses:
- Anticipated termination – this clause often allows landlords to terminate the lease early and reasons for early termination may or may not be given. Resist the inclusion of such clauses in your negotiations.
- Flaw – Be wary of onerous clauses that allow a landlord to evict a tenant if the rent has not been paid within a week of the due date. While it may seem standard, it is more common for leases to provide that tenants must be notified in writing at least 14 days before consequences are enacted. Negotiate required written notice in case of default.
- redevelopment – try to avoid redevelopment clauses that allow the landlord to terminate the lease to redevelop or renovate the premises.
- Indemnity – be aware of the indemnity clauses that indemnify the lessor against claims for loss or accidental damage by the lessor. Be sure to check your insurance policy to see if an indemnity clause on your business property could violate your policy.
- transfer dates – the delivery date is the date on which the premises are delivered to the lessee to start the installation of equipment, before the fixed start date of the lease. Avoid lease agreements that allow a landlord to change the delivery date without compensation, as you could end up incurring substantial costs if you are late or unprepared for retrofit construction.
- do good – a repair clause generally requires the tenant to leave the premises in good condition on departure. This generally includes the removal of any equipment installed by the tenant during the term. If your premises come installed and equipped, negotiate to modify the “take back” clause to a general expectation of leaving the premises in good repair and condition.
There are many other clauses and terms that can be negotiated: who is responsible for whose legal fees, as well as maintenance, repair and upkeep costs. Many businesses will find that they are much more successful negotiating lease terms to help lower their costs rather than trying to get the landlord to lower the price. A tenant brokerage service can help with the “legal argument” of the lease – they will help you better understand what your options are.
