Live Longer, Avoid Lease Disputes
March 02, 2015
- Commercial leases are filled with “boilerplate” provisions and commonly use ambiguous terms that can lead to litigation.
- By being aware of particular areas where trouble arises and negotiating before the lease is signed, you can avoid disputes later on.
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When considering lease renewals, renegotiations, or relocations, an amendment or new lease will be included, make sure you understand the fine print. To that end, consider the following important points as you plan future commercial real estate dealings.
Here are three terms that frequently result in misunderstandings and litigation.
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Use Provisions. The term “use” in this context can be either too broad, or too narrow. Common examples are situations that allow the landlord to stop a tenant from encroaching into another tenant’s realm and tenants who attempt to block the landlord from leasing to a competitor. By simply stating the exact permitted uses by both parties, future misunderstandings that result in costly litigation can be avoided.
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Duty to Repair. Did you know that in California, there is no duty by a landlord to keep leased property, except for common areas, in repair, or in any particular condition, unless the requirement is expressly stated in the lease? Most tenants don’t know this, and many find out with an unpleasant surprise when expensive repairs are needed and they end up footing the bill. Fortunately, a capable tenant representative can negotiate acceptable terms and get them in writing to avoid this situation.
- Tenant Improvements. Of all areas of commercial leasing, negotiations around financial responsibility around tenant improvements are one of the most critical. The release of mechanics (construction) liens after the completion of projects needs to be spelled out in provisions related to the improvements. To protect themselves, property owners may attempt to require a bond equal to the construction contract price, or that the contractor acknowledge that the tenant has financial responsibility and no mechanics lien will be filed against the landlord.
Taking the time to consider the meaning and implications of these terms can prevent difficult problems in the future. Better yet, partnering with experienced professionals for any type of commercial lease negotiation is the most cost effective solution to achieving business goals related to commercial real estate.
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