Lease Negotiation Tips for Tenants
By : John L . Egloff , Attorney
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So you ’ ve decided to start a new business or expand your existing business , and you ’ ve found the perfect location . For most businesses , that means you ’ ll be leasing your new space .
The first step in the leasing process will involve negotiating the “ business ” terms of the lease , which are generally reflected in a letter of intent . These terms will include a description of the space ( by size and location ), the term of the lease , any renewal options , the rental rate during both the initial term and any renewal options , a description of any work the landlord is required to do in the space , and a statement as to any “ tenant improvement allowance ” to be provided by the landlord to reimburse the tenant for all or part of the work the tenant performs to improve the space . Although letters of intent are often quite brief , a savvy tenant will actually want to make sure it includes everything of real importance to the tenant in the letter of intent . Want a sign at the top of the building ? Put that in the letter of intent . Want some reserved parking spaces ? Put that in the letter of intent .
Except in the case of large companies with numerous locations who have developed their own lease forms , the next step for most tenants will be the proposed lease from the landlord , which ( supposedly ) incorporates the terms of the letter of intent . The reality for many tenants will be that the lease is a 50-page document in which the landlord has very few responsibilities and no legal liability for anything whatsoever , while the tenant is obligated to do whatever the landlord says , whenever the landlord says to do it , under threat of a torrent of legal sanctions . In addition , it is not unusual to find that the lease does not accurately reflect many of the terms that were agreed to in the letter of intent . The question the tenant then faces is how much effort ( and legal expense ) it is willing to devote in trying to rewrite the lease to make it fair and accurate , and how cooperative is the landlord likely to be in that effort . Perhaps the only good news here is that most ( but not all ) landlords are surprisingly cooperative , so keep in mind the adage that “ if you don ’ t ask , you don ’ t get .”
Once you ’ ve reviewed the lease and addressed any inconsistencies with the terms of the letter of intent , here are a few negotiating tips and some potential issues to look for :
• Reciprocity . An excellent guiding principle in any lease negotiation is the idea that what ’ s good for the goose is good for the gander . This principal will apply to many , many provisions of the lease . For example , if the landlord is entitled to recover its attorneys ’ fees if it prevails in any lawsuit against the tenant , then the tenant should also be entitled to recover its attorneys ’ fees if it prevails . If the landlord has the right to cure any tenant default at the tenant ’ s expense ( such as by hiring a contractor to fix something the tenant was supposed to fix ), then the tenant should have the right to cure any default by the landlord at the landlord ’ s expense . If the tenant has to pay interest to the landlord on any amounts not paid to the landlord in a timely manner , the landlord should pay interest ( at the same rate ) on any amounts owed to the tenant .
• Landlord ’ s Consent . Whenever the landlord ’ s consent is required for anything under the lease , it should not be unreasonably withheld . The grant or refusal of the landlord ’ s consent should never be in the landlord ’ s “ sole discretion .” Since leases will often have many , many provisions where the landlord ’ s consent is required , the most efficient way to address this concern is to simply include a section at the end of the lease that states that “ In any case where the
20 Riley Bennett Egloff LLP - February 2017