Negotiate Your Commercial Lease
- Book Review,
by Dale R. Willerton
Book Description
-A tenant’s guide to leasing -Learn tips on negotiation strategies -Get the best deal possible -Find out how to maximize free rent
From the Back Cover
Signing a commercial lease could be one of the riskiest things you do in your business. One error or oversight could cost you thousands of dollars and even jeopardize your business. Whether you are negotiating a first-time lease or lease renewal, Negotiate Your Commercial Lease will alert you to potential pitfalls and help you avoid them; it will also show you what to strive for. Most tenants don’t ask for many of the terms and extras landlords often readily agree to — if asked. Drawing on the author’s broad experience in negotiating for both landlords and tenants, this book will get you thinking about your commercial lease in completely new ways. Topics covered include -- - Negotiating strategies and tactics - Selecting the best site - Determining square footage - Selecting the best lease term - Negotiating the rental rate and operating costs Read this book once if you’re negotiating a lease renewal, and twice if you’re negotiating a first lease.
About the Author
Dale R. Willerton is a certified Lease Consultant with more than 15 years of experience in lease negotiating and consulting. He gives weekly public seminars across North America. In addition, he consults exclusively to tenants.
Excerpted from Negotiate Your Commercial Lease by Dale R. Willerton. Copyright © 2003. Reprinted by permission. All rights reserved.
It’s true: lease agreements are boring. This is why so many tenants don’t read them. Therefore it is with much reservation that I put this section at the beginning of my book. If you can’t get through the first few pages, how will you get to the good stuff right? Consider this your permission to skip around the chapters and come back to this one later. You will benefit equally from this book whether you read it back to front or front to back. 1. What Is a Commercial Lease Agreement? You likely already know that a commercial lease agreement is a binding contract between two parties: the tenant and the landlord. The agreement can be verbal on deals with a term of one year or less (although I don’t recommend this; see the discussion of written contracts in section 3. below). Usually, for a lease agreement to be binding on a term longer than a year, it must be in writing. However, all commercial real estate laws are set and governed by either the state or province. For your own protection, make sure all your lease terms are in writing. Lease agreements are often preceded by an offer to lease. The offer to lease is often only a few pages in length, and is considered a binding document covering the basic business terms, such as rental rate, length of term and commencement date. The offer to lease is a matter of convenience for both you and the landlord. If you can’t agree to the points on the offer, there is no point spending time on the longer, formal lease agreement. In most cases, the lease agreement, once executed, will supersede the offer to lease. Many of the negotiating points discussed in this book are ones that should be made at the offer to lease stage. Formal lease agreements can and do vary in length, more often than not running between 35 to 60 pages. A short lease agreement favors the tenant simply by excluding many clauses and conditions which could potentially favor the landlord, whereas a 60-page lease agreement will leave nothing to the imagination. Every possible scenario or situation will be included, accompanied by the consequences, mostly to the tenant. Only a small part of the lease agreement represents the actual working business terms. At least 80 percent of the agreement defines wording, clarifies terms, and overall serves to protect the landlord’s rights while outlining particular remedies. Since, courts will look at the intent of the parties who enter into a lease agreement, the landlord will use long sentences and legalese to define words and explain conditions in an attempt to leave no room for misinterpretation of the document’s intent, regardless of what you might think it says. Frequently, tenants misinterpret words and phrases or fail to make certain the terms and conditions of the offer to lease were in fact included in the formal lease agreement. When I review lease documents for tenants, approximately 20 percent of the time the landlord’s administrative staff make mistakes in preparing the formal lease agreement. From getting the tenant’s name incorrect to miscalculating rental rates and leaving out the free rent, you really can’t be too careful. Tenants who used to turn to lawyers for lease document reviews are now coming to lease consultants who can provide more user-friendly advice, often for a much more reasonable fee. If there is mutual mistake, the party that drew up the offer to lease or lease agreement is usually found at fault. In one case of mutual mistake, a tenant’s rent per square foot was inaccurately multiplied by the area stated on the lease agreement: the tenant was paying more rent than actually required. In another instance, the lease term was to be five years, but because of a simple error in dates, the term was stated in the agreement as six years. In both these cases, as in other mutual mistake instances, unless the landlord is prepared to make the necessary adjustments to the agreement, the tenant has grounds to have the lease agreement voided based on the legal principle of mutual mistake. Most tenants view the commercial lease agreement as a necessary evil. However, don’t forget that some developer has invested millions of dollars to construct a building that will provide a home for your business. If you can’t agree on the formal lease agreement, the sheer number of properties from which you can choose to lease space puts the smart tenant in the driver’s seat. 2. Essential Elements of a Commercial Lease Agreement A lease agreement must include certain elements to be lawfully binding, or else it could be deemed voidable. These nine essential elements are -- (a) the parties to the agreement; (b) the location of the premises, stated with certainty; (c) the area of the premises and measurement standard; (d) the term (or length) of the lease and the commencement date; (e) the amount of rent to be paid, and when and where payment is to be made; (f) the operating cost, and when payment is due; (g) the fixturing period or possession date; (h) the date of agreement and authorized signatories; and (i) some form of consideration to consummate the deal. A consideration clause is usually something like, "In consideration for the sum of ten dollars, paid and received, the tenant and landlord agree as follows...." A court will never judge on whether the consideration paid was just and fair, only whether a legal agreement or contract was made because money changed hands as part of the transaction. Other points usually covered in the agreement are the personal guarantees, if any; conditions of termination and/or relocation; default remedies; renewal option; and inducements or allowances.
Buy from Amazon
Compare Prices
|
|
Home
