Leasing commercial premises can be a complex area of law for both landlords and tenants. There are many problems or traps to be avoided or minimized.
A lease is a significant financial and legal commitment between a landlord and a tenant. The total rent paid over the term of a lease can be substantial. The consequences of a wrong move by either landlord or tenant can be costly.
There are few grounds for a tenant to walk away from a lease. Landlords are generally in a stronger legal position than tenants though even their rights to terminate a lease and evict a tenant can only be exercised on specific grounds.
It is crucial for both tenants and landlords to understand the consequences of their lease and identify areas where care should be taken. The aim is to avoid or minimize disputes, not create or escalate them.
OFFERS TO LEASE
The starting point is the preparation of the Offer to Lease. We can help landlords and tenants with this. The Offer to Lease will provide that the tenant will enter into the landlord’s “Standard Form of Lease” as modified by the Offer to Lease. It is critical that any Offer to Lease and the Standard Form of Lease are reviewed carefully.
REVIEWING THE LEASE
Some of the main areas of concern in commercial leases for both landlords and tenants are:
- Financial considerations:
- what will the actual cost of the premises be?
- can the area of the premises be re-measured and then rent adjusted?
- are there any hidden charges such as a gross-up or additional fees?
- Business considerations:
- what can the premises be used for?
- does the zoning permit the use?
- what uses are prohibited?
- Functional considerations:
- what amenities does the business need, such as power, HVAC, parking?
- does the lease adequately provide for these?
- are utilities correctly metered?
- Restrictions on assigning the lease or subletting the premises?
- What do the insurance provisions require?
- What conditions are attached to renewing the lease?
We can review leases and help landlords and tenants negotiate terms.
DURING THE TENANCY
During the term of a lease, both the landlord and the tenant need to comply with the provisions of the lease. If a dispute arises, a tenant should always pay the rent because most commercial leases require payment of full rent even if there is a dispute. A tenant can pay the rent “under protest.”
We can help landlords and tenants resolve disputes.
RENEWING THE TERM OF THE LEASE
Options to renew are quite technical. Conditions for renewal such as time limits, the method of delivery and notice to renew need to be fulfilled precisely. Once exercised the next step is negotiating the rent for the renewal term.
We can help landlords and tenants with the exercise of renewal options and with negotiating rents for renewal terms. If agreement on the rent cannot be reached, we can help with rent arbitrations.
The end of a lease usually comes at the expiry of its term, although sometimes a landlord or, less often, a tenant can terminate it.
Terminating a lease is a technical process, and there can be a significant downside if not done properly. We can help landlords and tenants deal with terminations.
When a tenant moves out there can be issues about the condition of the premises and what can be removed. We can help landlords and tenants deal with these issues.
McKechnie & Company
McKechnie & Company offers a full range of services to both landlords and tenants in commercial leases including reviewing offers to lease and leases, rent renewal negotiation and arbitration, and other dispute resolution services.
We would be pleased to discuss your leasing issue with you. For an initial consultation on commercial leasing issues, please contact Phil Di Tomaso.