Reading the Lease -
The "Nitty Gritty"-The part everyone hates to read
What Should the Lease Include?
Once you get through the Lease Summary page, you will be consumed by anywhere between 30 and 50 separate Paragraphs or Sections. On the surface many will seem pretty clear and non-threatening but just remember, if it didn’t have a purpose, it wouldn’t be in the lease. In a way, we might indemnify ourselves on that issue for one specific reason. Too often, leases are handed down from attorney to attorney or owner to owner. Additions are made as markets change but rarely, it seems do those attorneys remove anything. Philosophy, “why take anything out that we already have.” In our experience, we find too often attorneys don’t even read the whole lease. We can’t tell you how many office leases contain retail clauses that make no sense. If your broker can’t at lease give you basic business advise (not legal unless he’s also an attorney) on lease issues, get an attorney to answer all your questions.
Page One- Here We Go
The unfortunate thing is there is no standard form that is used by all landlords nor is there any standard outline used by lawyers to draft leases. Therefore, you have to hope you get a lease that addresses all issues. Almost every lease starts out by identifying the parties to the lease, the Premises, and additional parts to the Premises such as common areas. A good lease will also bullet definitions of terms and issues mentioned in the Lease. Some of those definitions may be restating items noted in the Lease Summary such as the size of the Premises while other leases will go into more depth regarding that item such as giving the legal definition of the property from the county registrar’s office plus specific guidelines as to how the space will be measures such as using the nationally recognized “BOMA” standards.
This may sound repetitive but look at the Lease summary as a “Next Level” Table of Contents. Everything in that Summary should be more clearly defined later in the lease.
In creating this chapter, we used as a reference point a lease we recently completed in Irvine, CA. The lease was broken down into 21 sections, each with several sub-sections. While we did recommend and were able to get about 20 modifications to the document for a generally considered small space (under 3000 SF of office space), the basic body of the lease was fair. Never assume any lease is the same as the one you signed five years ago.
The lease we are using as a reference contained a clear Table of Contents, a Summary Page noting 15 items most of which brokers would normally refer to as “deal points” and a list of over 50 definitions as used in the lease. It’s good to have this up front so there is no confusion as you read through. If there is no list of definition up front, look just before the signature page. It sometime appears there.
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