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Tenants are generally allowed to transfer their lease interests to a third party as long as the landlord is notified and provides consent in advance. The two basic ways to structure such arrangements are as:
Offering an exclusive can help you lure new tenants. But offering the wrong kind of exclusive can cost you a renewal. SNAFUs are apt to occur when you use a common form of exclusive stating that the tenant is the only tenant in the shopping center that’s allowed to sell a particular product. The problem is that the leases of your current tenants may not include any provisions expressly limiting what they’re allowed to sell.
Boilerplate language requiring tenants to get your consent to assign the lease may not be enough to guarantee your right to consent to future assignments. Thus, in saying yes to a lease assignment, you may be inadvertently consenting to all of the subsequent assignments that the assignee chooses to make. Result: You lose control over which business occupies the premises for the rest of the lease term.
Do you grant your tenants the option to purchase the leased premises? If you’re using a standard lease form to provide such an option, you might also be inadvertently giving the tenant an unexpected windfall: one or more months of free rent in the months after it exercises the option. Here’s a look at the loophole and how to plug it.
Tenants that must pay common area maintenance (CAM) or operating costs typically want assurances that landlords will keep those expenses reasonable and in line with the average costs that owners of other shopping centers or office buildings in the area pay. And if the tenant has bargaining clout, you’ll have to give in to its demands. The typical result is a commitment by the landlord to hire contractors and service vendors that are “competitively” priced.
It’s a clause that almost every commercial lease contains, yet rarely gets even 10 seconds of attention. The clause says something to the effect that “Landlord has made no representations to Tenant other than those contained in the terms expressly stated in this Lease.” The idea of the “no representations” clause is to bar tenants from claiming that the landlord made false representations about the premises before the deal was signed.
In many states, the lease guaranty ends when the underlying lease ends. So, unless there’s language to the contrary, the guarantor is off the hook if the tenant holds over after the end of the term or renews the lease. That leaves you holding the bag for any tenant defaults that occur during the holdover or renewal term. The good news is that as long as you’re aware of this loophole, you can easily plug it by including the right language in the guaranty agreement.
In these tough times, landlords need to find ways to turn lemons into lemonade. One example is considering whether the lemon of the tenant who’s paying below-market rent might yield sweet lemonade in the form of a reduction in your property tax assessment. This recipe has worked for many property owners, and it might just work for you.
A commercial lease to an auto shop tenant includes three key clauses:
1. Tenant’s duty to maintain insurance. Section 19 of the lease requires the tenant to maintain fire, business, and liability insurance on the property and name the landlord as an additional insured. It also provides that “tenant shall provide Landlord with a copy of all policies of insurance within 30 days of Landlord's request of same.”
When negotiating the terms of a work letter with a tenant, don’t just agree to do a particular item of work “to code,” without listing any specifics or limitations. When not properly defined or limited, the phrase “to code” can be the source of confusion, miscommunication, and litigation.
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