Reading the Lease: The Lease Summary

 

It all starts here. Assuming your lease has a summary page, it is probably the one and only page that most people read. After all, it fits into today’s fast paced world by providing you with a one-page overview of all the general terms and conditions of the lease. Plus, it’s not written in legal jargon. Simple one line statements name the parties to the lease, the building and suite, the start date of the lease, length of the term, and how much rent you pay. Those are the items most people focus on. There is, however, more that should be noted on the summary page. We often find costly errors or exclusions on this page that you need to be aware of.

 

What’s missing? We can spend months on just this one page of the lease, but we’ll try to highlight some items that need to be addressed on the summary page but are often overlooked. Here we go.

 

1. Make sure both your company’s full name and that of the landlord is spelled out clearly—no trade names. Remember to add the type of entity (e.g. California Corporation, an individual, etc.).

2. Define the building, making sure to include the legal plot address and the exact size of the building. You’d be amazed how landlords sometimes change the size of the building during the lease. This could impact your pro-rata share of expenses.

3. Check the commencement date to state “approximate.” We’ve seen landlords who don’t deliver the space on the commencement date, yet claim you have to start paying as of that date. Typically, a good lease will have language or refer to a “lease commencement amendment” that the parties sign when commencement actually occurs. Save that document, because property managers change, and you don’t want to be kicked out before your term is up. Yes, we have seen that happen.

4. Define the rentable and, if possible usable square footage. Again, we’ve seen landlords try to change the load/loss factor percentage on a space during the term. By changing that percentage, your 3400 RSF could change to 3800 RSF, even though your usable square footage remains the same.

5. Make sure your base year for operating expenses is defined. If you sign a lease after October 1, the base year should be the following year. Otherwise, you start paying expenses after only three months.

6. Notices: Be sure the lease specifies to whom notices and copies should go. Often the bodies of the lease states notices are to be delivered to the premises. We like to see notices go to the specific corporate personnel and copies come to our office. If your broker doesn’t want any part of receipt of notices, call us—we believe it’s a broker’s obligation to continue to help you even after the lease is signed.

 

While this is a lot of information, we’ll try to slow down over the next few chapters and take one lease clause at a time.