Commercial Lease: Why There Is No Such Thing As A “Form” Lease. I get this a lot from my business clients that are looking for commercial space to lease, and present me with a commercial lease to review and advise on. “It’s just a form, it shouldn’t take long” or some version of that.
Commercial Lease War Stories:
Tell you a quick commercial lease story instead of moralizing about why I don’t like clients griping about my fees before I even start working for you: A long-time client asked me to review a commercial lease for a retail space he was considering for a dance studio. Looked up the address because I’m curious but also thorough. I knew the property, it was an old shopping center from the 1960s anchored by the chain grocery store up in Chicago.
So I’m reviewing the commercial lease that was presented to him as “oh it’s just a form go ahead and sign it” or some version of that tale that landlords tell. Now, the lease has a provision in there that the tenant (my client) would be responsible not only for routine maintenance of the HVAC system, but any repair or replacement it may need during the term of the lease. Back then it would have been probably about a $15,000 or more excursion if the main a/c unit crapped out and needed replacing.
So I asked my client, “have you had the a/c unit inspected? That building is 50 years old.” Well, he had not inspected the mechanical systems but proceeded to do so on my advice. And it turned out the a/c unit was original to the building, and the landlord was unable to give my client the service history of the a/c unit. He rejected the lease based solely on that provision that could have held him responsible, one day into the lease, for 50 years of neglected service on just one a/c unit.
The point of the war story:
The point of this story is that commercial leases are not “forms” to be signed without analysis in the context of the tenant’s proposed use of the facility. In my days on Earth I’ve probably reviewed, consulted on, and drafted over 300 commercial leases. No two leases were the same, including the ones I drafted. Similar, but modified based on the property, structures, and proposed tenant uses.
Some commercial leases I review are well done and appropriate to the building and use (remember from my old posts – legal documents are situational, they have to be read and understood in context). Most looked like the Moe of a landlord drafted it himself. Many – more than you would care to know – have some trap built into them to lump off deferred maintenance costs onto the tenant, or some other trap to add on fees that aren’t always disclosed in the lease itself (like property tax increases). Most of my smaller clients just see the “space” they’re going to rent, then jump in, without considering what they are really undertaking.
More war stories because everbody likes “for examples”:
Another story about a commercial lease: client asks me to review a retail lease for a new location. It has a crude diagram of the leased space attached, but no dimensions or boundaries. For example, does the leased space end at the drywall so that the tenant is not responsible for anything in the drywall like wiring or plumbing, or does it extend past the drywall to the firewall.
I point this out to my client and he gets a much better description from the landlord, with clear boundaries and responsibilities properly allocated between tenant (within the space) and landlord (without the space, also known as common areas). A pipe in the wall burst a few months into the lease, and, you guessed it, in-wall mechanical systems including water pipes were allocated in the lease as a landlord repair/maintain item. The landlord fixed it after first trying to assess the repair duties on my client, and the landlord also fixed the water damage in my client’s leased space. Busted pipe was a landlord responsibility, not tenant.
Conclusion on commercial lease
There is no such thing as a “form” commercial lease. They are contextual based on the proposed use. And they are negotiable.
Contact me if you have any questions on commercial leases or any other business transaction. In western North Carolina, Asheville, Waynesville, Hendersonville at (312) 671-6453 or palermo@palermolaw.com.
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