The Dreaded Lease Basics You Should Know

 

A lease is a contract like any other contract that your company enters into. Why is it then that the vast majority of tenants simply sign the landlord's “standard lease" with only some minor modifications (if any at all)? If you were presented with any other contract by a vendor, you would surely modify the language so your interests were better  protected. Oh, that's right—it's the landlord's standard lease. All the tenants sign it.

 

If you believe this, I do have a bridge in Brooklyn for sale.

 

Leases are often very long and complex. For the most part, everyone hates to read them. Maybe that's simply a strategy by the landlord's attorney to make sure they don't get read or modified. Whatever the reasoning is, always read your lease.

 

Say you're not an attorney—so what? You're also probably not a real estate broker—so what? While there may be lots of legal jargon you don't understand, it certainly would be worth your time to give the lease a once over. Included in this and other chapters, we will go over specific sections of the lease and how they may affect you and your company. A vast majority of the leases we review "after the fact" contain clauses that can have tremendous negative effects on the tenant, but don't appear in the base rate or size of premises sections. Even those simple sections may contain inaccuracies you need to watch out for.

 

First, here are some basic questions to ask: What type of property are you in? Is it an industrial building? Office complex? Retail center? A Multi-tenant park? Every type of property has certain idiosyncrasies and needs that must be addressed. In California, the American Industrial Real Estate Association (AIR) has developed a series of "standard" leases that are specifically geared towards each type of a specific property. Remember, “standard” does not mean “right,” nor does it mean “completely fair” for you.

 

Why is that so? Leases should address all the issues relevant to the particular building. Industrial buildings do not have the same common area costs as office buildings. For that matter, multi-tenant industrial buildings have different costs, which are borne by the tenant’s office or industrial users. Retail—that's a horse of a totally, totally different color.

 

We have seen industrial leases used for office buildings that never mentioned any right for the tenant to park. When the landlord decided to sell the empty lot next door to a parking concessionaire, he overstepped. How about the services the landlord is supposed to provide? A multi-tenant industrial park will never address the new telecommunication issues. If the landlord gives you one of those leases and your phones go down, who's responsible for problems within the building? (Check your office lease, chances are even your latest lease forgets to address that issue).

 

Oh, so you have discovered you have an office lease for your office building. Think you're out of the water yet? Think, again. Is your lease a FSG, NNN, MG, IG? Do you even know what language that is?