Reading the Lease:
The "Nitty Gritty" Parts 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. 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 those attorneys only rarely remove anything. Their philosophy is generally, “Why take anything out that we already have?” In our experience, we often find 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 advice (not legal—unless he’s also an attorney) on lease issues, get an attorney to answer all your questions.

 

Page one of the lease—here we go. Unfortunately, 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 your issues. Almost every lease starts out by identifying the parties to the lease, the premises, and additional parts of the premises (such as common areas). Good leases 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 those items. This depth could be the legal definition of the property from the county registrar’s office, or it could give specific guidelines for the way the space will be measured (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 a lease we recently completed in Irvine, CA as a reference point. The lease was broken down into 21 sections, each with several sub-sections. While we did recommend (and were able to get) about twenty modifications to the document for a fairly small space (under 3000 SF), the basic body of the lease was fair. Never assume any lease is the same as the last one you signed.

 

The lease we are using as a reference contained a clear table of contents, a summary page noting fifteen items (most of which brokers would normally refer to as “deal points”), and a list of over fifty 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 definitions up front, look just before the signature page. It sometimes appears there.