It's our STANDARD lease. Everyone signs it!
That's a great statement that most all tenants hear. The landlord hopes he response is, "Well, I guess it must be ok. Where do I sign?"
STOP! STOP! STOP! STOP!
HAVEN'T YOU BEEN READING OTHER CHAPTERS OF “WHAT THEY FORGOT TO TEACH YOU AT TENANT SCHOOL OR MAYBE YOU JUST FOUND THIS HOME PAGE??
Everyone likes the easy way out. As we noted in other chapters, what’s the landlord loves is a big tenant with a long lease and AAAA credit. The reality is that doesn't happen. Reality is, most buildings (other than the single user, big box, industrial buildings) are made up of a mix of many small tenants and a few larger users. Each most likely operates a different type of business, has different products, and has different needs. Why then would you sign the same STANDARD contract everyone else in the project did?
Here are a few suggestions, before you actually have your lawyer read the lease (oh yes, don't sign the lease without a lawyer's review. It is a binding legal document.)
Take a long look at your business plan. What are some of the issues you may be facing in during the Term? Expansion? Contraction? Merger?
Read the lease carefully. Sure it's boring. It's probably in small print too (Sometimes a secret plot just to discourage tenants from reading the lease)
Check the obvious stuff. Make sure items like square footage, rent increases, start/finish dates are correct.
Now for the fun stuff
Big companies who have their own real estate department, in house attorneys, and lots of locations are used to modifying leases to their standard form. And landlords are used to negotiating those changes. After all, those are the Elephants we talked about in another chapter. But, if you don't fit that profile, you're going to have to do a little work to protect yourself. Every broker will read your lease to make sure the dates, price, and square footage are correct. That's what they base their commission on. Lawyers will look for the "Oh my Goshes." You have to be aware of issues that affect your business.
If the lease states you have 2700 RSF (rentable square feet), can the landlord change that during the term? Most leases give them that right.
If the "Elephant" wants your space, can the landlord move you? Most leases say you can be moved into "similar" space and the landlord will pay for some moving costs. What is the new space is larger? What if you have specific business machines that require substantial cost to move? Does the lease protect you? How long do you have to tell the landlord you will accept the move and can you reasonably refuse or have the option to cancel the lease?
The landlord wants you to indemnify him against mostly everything but does he indemnify you?
Did you read your "Additional Rent" or "Common Area Maintenance" section? If the landlord spends big bucks on tenant improvements for the "Elephant," does that cost get passed on to you? How about other charges made against other tenants and not for your benefit?
What happens if the landlord sells the building? Goes bankrupted? Can the new owner just "kick you out?"
You may be in default if you do not respond to the landlord or make payments "on demand." If you sign the checks and are in Chicago or New York drumming up business for a week you may come back to an empty office. (In reality, it may mean a lot of unnecessary hassles you could have avoided had you modified the lease to give you five or ten BUSINESS DAYS to respond.)
As we stated last month, let all your lease requirements be known early on. Landlords love to hand a lease to a small tenant and have them sign the Standard Lease. "We can't make changes to the lease for such a small space." Smaller tenants, more times than not, need to be more specific on their lease requirements than large Elephants. A small problem may have a far greater impact on the small tenant than the larger user who can bury the problem under a corporate blanket. While the space may be ONLY 1500 RSF out of the Landlord's 250,000 SF building, IT'S YOUR ONLY 1500 RSF.
In other chapters we share with some real life HORROR STORIES and tips on modifying your lease to protect your business.
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