Your New Commercial Lease Deal: Some Pointers

Have you found a great property you want to lease for your office, store or industrial business? Here are some pointers to help you save money and get the best deal.

Don’t be too quick to jump into rent and other negotiations with the landlord’s rep or listing agent. Consider engaging your own tenant’s rep to vet your options and help cut the deal. 

Most major real estate brokerage firms have agents specializing in commercial leasing. An expert tenant’s agent with good negotiating skills will add value for you. He or she has access to computerized, broad-based current market information you don’t, such as the landlord’s competition, upcoming vacancies, going market rental rates and tenant inducements. 

Remember that your lease is a key business asset (and obligation). It may also be important to a future buyer of your business, who will likely want to take over your lease. 

After initial negotiations, the landlord’s rep will likely give you a so-called “standard” document, summarizing key business terms of your proposed deal. Usually only a short few pages, it may be called a ”Standard Offer to Lease” or “Standard Agreement to Lease.” But don’t be fooled by the word “standard.” Landlords often tailor-make these documents (as well as their much longer leases) to protect the landlord’s interests; they may be “standard” only for the particular landlord and property. 

So don’t rush into signing on the dotted line.

Once there’s a valid agreement to lease, it’s as binding a contract as a lease, with lots of implications. You’ll therefore want to have the document checked over by your lawyer first. 

Also, the document may have a supposed “boiler-plate” clause that obligates the tenant to sign on to the landlord’s (not-yet-seen) form of lease, provided later. So if you sign the offer/agreement, but later don’t like what the landlord’s long, multi-page “standard” lease has in it, you may be stuck. 

You should see your lawyer about your initial offer or agreement document before you sign anything. After review, your lawyer can help clarify and nail down any uncertain, unclear and sometimes even inconsistent provisions in it. Uncertainty as to important terms could jeopardize your lease deal altogether. 

Your discussions may also bring to light new points that may lead to an improved deal with the landlord. For example, perhaps your landlord will accept a time-limit on any required personal guarantees, or agree to make it easier for you to transfer (“assign”) the lease to a future buyer of your business, by consenting to act reasonably here. 

You might also discuss trying to “cap” (put limits on) annual increases in certain expenses you must share, lease renewal rights/options, expansion (or contraction) rights for your space as your business grows (or shrinks), relocation terms (if the landlord has a right to relocate you under the agreement), the benefits of registering your lease at the land title office, and more – it all depends on your offer document and particular situation. 

Your lawyer will also put in the document that the landlord’s “standard” form of lease is subject review and approval by you or your lawyer before you have to sign it.

Bottom line? See your lawyer before you sign any papers about your lease deal, or if you encounter problems under your lease arrangements afterwards.

 

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This column has been written with the assistance of ANDREW LAU. The column provides information only and must not be relied on for legal advice. Please contact ANDREW LAU at (604) 681-3833 for legal advice concerning your particular case.

 

Lawyer Janice Mucalov, author of this article, writes about legal affairs for several publications. “You and the Law” is a registered trade-mark. © Janice Mucalov.

 

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