Guest Blog: Commercial Leases – Reading them may be painful but not reading them can be worse

Commercial Leases - Hollywood FloridaIn all the years I’ve represented Landlords and Tenants it never ceases to amaze me how few Tenants actually understand what’s in their lease. While I can’t really address every issue that I think a Tenant should pay attention to here, I would point out a few of what I consider to be the most important:

  1. Operating Expenses – Most leases require a Tenant to reimburse for some portion of Operating Expenses.  Understanding how that term is defined is critically important.  Some leases include “management fees” or may include capital expenditures.  You’ll want to try to negotiate a cap on Operating Expenses and/or limit them to items outside of the Landlord’s control.
  2. Relocation Rights – Leases often provide that a Landlord has a right to move a tenant to another location.  We recommend that this be limited, removed or that at least the Tenant have a right to terminate.
  3. Personal Guaranties – Personal Guaranties don’t necessarily have to cover the entire lease term.  Try limiting it to a number of months or to a maximum number to bring certainty to potential downside.
  4. Renewals – Avoid renewal provisions that don’t have clearly defined rent or clearly defined mechanisms for calculating rent.  The uncertainty regarding renewal rent may effectively leave a Tenant with a renewal option that really isn’t much an option at all.
  5. Assignment and Subletting – Consider negotiating this to be subject to Landlord’s reasonable discretion instead of their unfettered discretion.

The best advice that I would give someone preparing to sign a long term lease is to seek the advice of a competent and experienced real estate attorney.  The value that his/her advice can bring you will dwarf the cost over the long term of your lease.

Eric A. Jacobs is a partner with the real estate focused law firm Nexterra Law.  Eric serves clients through the State of Florida on all matters relating to real estate including litigation.  The above is intended  for informational purposes only and is not intended to constitute legal advice.