It’s bad enough having to call your real estate litigator. But it’s worse when he or she tells you that your lease is missing some critical provision that would help you in your current dispute. Every commercial lease is different, but there are provisions that most leases do or should have. Here are 10 provisions your litigator wants to see in your lease.
1. Everything in writing. If the lease isn’t in writing, the parties may have bigger problems than missing provisions. Get it in writing and make sure the lease requires that all amendments are in writing and must be signed by the landlord and the tenant.
2. You’ll get paid – I guaranty it. This one is for landlords. When possible, get a guaranty. If the tenant defaults on rent, there’s a good chance it’s because the business is in trouble, which means it will be tough to collect unpaid rent. A guarantor helps mitigate that risk. If the guarantor is an individual, try and get a guaranty from his or her spouse too. Of course, large commercial tenants generally do not provide guaranties, often leaving the landlord as a creditor in a bankruptcy. Just ask Sports Authority’s landlords.
3. This is what it looked like when I got here. Specify in what condition the tenant must return the space to the landlord at the end of the term or on termination of the lease.
4. What can the tenant do with the space? Commercial leases typically state how the tenant can use the space. Landlords and tenants should consider whether to designate the tenant’s particular use as required (i.e., limit the tenant to a specified use) or permissive (typically giving the tenant some discretion as to its use of the space). It can make a difference.
5. How is that a breach? Some defaults, like failing to pay rent, are obvious. But there are many other obligations that the landlord or tenant may deem to be material or significant. The lease should be unequivocal about what constitutes an event of default by each party, and whether there is a cure period, and if so, what that is.
6. Pass through costs. Commercial leases typically provide that costs relating to common areas be passed through to tenants, usually pro rata (proportionately) based on the percentage of the overall property that the tenant occupies. This includes common area maintenance (often called “CAM”), and real estate taxes. A landlord can pass through only what the lease allows, so a lease should be specific on this point.
7. It’s not you; it’s me. Landlords typically want to maintain control over the tenant’s right to assign the lease or sublease the space. A lease should specify the landlord and tenant’s rights with respect to assignments and subleases.
8. I need a remedy. What happens when the landlord or tenant defaults? The remedies section for both parties needs to be specific. In many instances, Florida law will fill in the gaps where the lease does not.
9. Where will an eventual lawsuit be? Don’t leave any doubt as to where you can sue the other party or where you can be sued. Agree on jurisdiction (usually the state where the property is) and venue (usually the county where the property is).
10. I won, now pay my fees. By default, each party pays its own attorneys’ fees, regardless of outcome. The exceptions are when a statute or contract provides otherwise. A commercial lease should provide that the prevailing party in litigation can recoup its attorneys’ fees and litigation costs from the losing party.
Related Blog Posts:
- What happens when a tenant’s business becomes illegal during the lease term?
- The sky is falling…does the tenant still have to pay rent?
- Florida’s Narrow Take on Force Majeure Clauses
- What Does “Ordinary Wear And Tear” In A Commercial Lease Really Mean?
- Landlord Liable for Subtenants' Trademark Infringement
- Landlord Loses Additional Rent Dispute Based on Lease Language
- My Dog Ate My Lease Renewal Notice
- The continuing lease guaranty that didn’t continue after all
- Court stops foreclosing lender from getting rents collected by property owner
- Could an eviction lawsuit result in a tenant paying less rent?
- A Pricey Drafting Error in a Jewelry Store Lease
- What happens when a lease doesn’t say how to calculate rent after renewal?
- Business of Real Estate
- Liens and encumbrances
- Americans with Disabilities Act
- Ad Valorem Assessments
- Attorneys' Fees
- Loan guaranties
- Promissory Notes
- Restrictive Covenants
- Commercial Brokerage
- Cyber fraud
- email hacking
- Property Tax
- Lis Pendens
- Partnerships and LLCs
- Creditor's Rights
- March 2020
- October 2019
- August 2019
- July 2019
- May 2019
- February 2019
- July 2018
- June 2018
- May 2018
- March 2018
- February 2018
- January 2018
- October 2017
- August 2017
- July 2017
- June 2017
- May 2017
- March 2017
- February 2017
- January 2017
- December 2016
- November 2016
- October 2016
- September 2016
- August 2016
- July 2016
- June 2016
- May 2016
- April 2016
- March 2016