Article Summary:
Tips to help you negotiate a commercial lease.
Tenants almost always look to their landlords for much more than simply the right to occupy space. They frequently purchase a number of services. The landlord may "build out" the leased space for the tenant's specific use. It will probably provide heating and air conditioning, cleaning, utilities, and communication services. The landlord is also frequently responsible for most, if not all, of the maintenance and repair of the leased premises and the facility of which it is a part. This includes shoveling snow, patching parking lot potholes, keeping the lawn mowed and the lobby clean, keeping the elevators running and providing security. A landlord's failure to meet its obligation to a tenant can have a serious negative impact on a tenant's business.
In contrast, a tenant's responsibilities amount to not much more than paying for use of the leased space and the services provided by landlord - in advance.
Many commercial lease forms attempt to reverse this imbalance of responsibilities. They specify the tenant's responsibilities and detail the many painful remedies available to the landlord if the tenant strays from the straight and narrow. When they get around to describing the landlord's obligations, however, leases are often vague. They frequently attempt to excuse the landlord from the consequences of a failure to meet its lease obligations and to limit the remedies available to the tenant if the landlord breaches the lease.
To have some assurance that a tenant gets what it was told it would get and what it is paying for, every commercial lease should at least:
- Describe in detail the landlord's responsibilities to tenant. For example, a carefully drafted lease will set forth the hours during which heating and air conditioning will be provided and will establish agreed-to temperature and humidity ranges.
- Define what constitutes a default by the landlord and describe the remedies available to the tenant if the landlord fails to perform its obligations. Many landlord lease forms eliminate these provisions entirely or severely water down the remedies available to the tenant.
- Provide a method for quick, inexpensive and final resolution of any disputes over the lease.
A tenant should be firm in securing these provisions in a proposed lease. In the long run it will be worth the effort to avoid disruptive disputes.
This information should not be relied upon as a substitute for individual legal advice.
Peter C. Baggerman is a Member of Eckert Seamans Cherin & Mellott, LLC in the Real Estate and Land Use Department. He advises clients on such matters as real estate finance, real estate development, commercial leasing, construction contracts, conveyancing and title issues, and general and limited partnerships. Mr. Baggerman is a member of the National Panel of Arbitrators of the American Arbitration Association, and of of the Real Property Section of the Allegheny County Bar Association.
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