Commercial leases are complex and lengthy documents prepared by and generally favoring the landlord. While the most obvious terms are the focus of negotiation, like rent, length, and build-out credit, many of the other provisions that are often overlooked as “boiler plate,” can be traps for a tenant, substantially reducing the value of the lease and eroding profits during its term.
Some of these hidden tenant traps include:
- Exclusivity. Can the landlord lease other space in the property to a competitor?
- Property Tax Reassessment. What is your exposure to increasing property tax assessments and can you cap it?
- Common Area Expenses. What is included and can some landlord discretionary expenses be eliminated, capped, or amortized beyond your lease?
- Tenant Expenses. What are your repair and maintenance obligations?
- Force Majure. What rent adjustments are available if you are unable to occupy or operate in an emergency?
- Occupancy Interruptions. Are rent abatements or other remedies available when operation or occupancy is restricted by repair, utility service, or other access or usage interruptions?
- How will this affect your business and lease?
- Assignments. Are assignments by landlord or tenant addressed and how?
- Triple Net. Are all current and future tax, insurance, maintenance, and repair obligations clear?
- Activity. Are you protected in the event of loss of foot traffic or other tenants?
- Hours. Are you and other tenants required to be open set hours?
- Parking. Do you have identified and sufficient parking?
Identifying and addressing these tenant traps in commercial leases early in your discussions not only avoids problems after you sign the lease but can prevent you from spending time evaluating locations with leases that could substantially reduce your profitability. The attorneys at Brooks, Tarulis & Tibble, LLC have experience in reviewing commercial leases for tenants. If you have any questions or concerns, please contact us.
