Commercial Landlord-Tenant Law
Commercial Lease Negotiations, Drafting, Review, and Litigation Services.
Lease Negotiations, Drafting, and Review: It is not uncommon for a commercial lease to be over 50 pages long. As such, you need an attorney with the patience and diligence to review each page, understand your business, and negotiate key points. I like the acronym DRAFT.
D- Damages
R- Rate
A- Allowances
F -Flexibility
T- Term
While this is not all-encompassing, it is an excellent starting point for developing your negotiation strategy.
In terms of Damages, what happens if a lease does not go as planned is just as important as the monthly rental payment. For landlords, you want clear terms on sub-leasing, assignment, bankruptcy, default, and so on. For Tenants, it is important to seek flexibility, guideposts on what types of damages are and are not allowable, and provide a procedure for mitigating damages.
In terms of Rate, this is all dealing with the cost of the lease including Rent, Operating Expenses, Maintenance Expenses, and so on. Both parties need to ensure they are receiving a fair deal.
In terms of Allowances, this is dealing with the bonus stuff such as a construction allowance, promotional items, and so on. Again, these are all highly negotiable items and both parties need to ensure they receive a fair deal.
In terms of Flexibility, you want a strong lease that provides some flexibility. This is important for both Landlords and Tenants. An unbending sword shatters when tested in battle. Similarly, Landlords need to be able to enforce the lease while Tenants need to be able to comply with the lease. Damages should never be the goal for either party. Ideally, both the Tenant and Landlord should seek to have a very long and profitable relationship without much drama.
Term deals with how long a lease will last plus renewal options, buyout options, and so on. Again, all are highly negotiable depending on the business.
Litigation: The most common problems that arise in a commercial landlord and tenant relationship are lease violations such as failure to pay rent, failure to comply with building provisions, and so on. As such, breach of contract is a common claim. To learn more please read my article on breach of contract litigation. In addition, other various claims may stem from the landlord-tenant relationship including theft claims, unjust enrichment claims, defamation claims, and so on.
It is important to address problems early on to prevent them from snowballing. Relationship building is your 1st line of defense. If the landlord and tenant have a good working relationship it may be possible to avoid costly litigation with a simple sit-down conversation. If that does not work, then you may consider a more formal type of negotiation known as mediation. Then if that does not work, litigation is always a viable option but a more costly option. What is appropriate will depend on the specific situation.