Corporate Legal Advisors SM

LEASING YOUR FACILITY

I represent both owners and renters of commercial properties. I like to think that I am a reasonable and principled professional. However, when I am representing a landlord, I work hard to strike the best "reasonable" deal for my client. In these transactions, if the tenant is represented by an attorney, the tenant will almost always get a better deal than the tenant who does the job without legal help. Put another way, landlords almost always use attorneys. Why do you think that is? (And, by the way, even the landlords who claim to be doing it themselves usually are using an attorney on the side.)
  1. Dollars and Sense. The total dollar amount at stake, let alone the very ability to continue to conduct the business of business, makes these transactions as substantial as any transaction involving your business. Yet, many business owners still think that negotiating the leasing of a new facility, renewal of an existing lease or addition of space to an existing lease is a job they can best do themselves. What is wrong with this thinking? Few business owners will handle the routine maintenance and repairs, including oil changes, on their own car. Even fewer would seriously consider representing themselves in a lawsuit involving a dispute valued at $30,000. Yet many business owners represent themselves in what may well be one of the largest financial business transactions of the year. Assume a five year lease including renewals, the cost of legal representation in a lease negotiation, as a percentage of the amount at stake, is a tiny fraction of the cost of using professionals in the two previous examples. Do the math: a five year lease of space that has a total monthly rate (adding base and additional rent) of $8,000 results in almost $500,000 in payments over the term of the lease.


  2. All Good Business Owners Are Good Negotiators. One of the primary tasks of a business owner is negotiation. Most business owners consider themselves good negotiators. However, being a good negotiator in areas where you have training and experience does not necessarily carry over to real estate leases. As one of my clients stated some years ago: "I like to think of myself as a pretty good negotiator, but not when it comes to leases. It's like comparing a baseball game to a football game; both are sports related but with important differences."


  3. Just What Is A Covenant Of Quiet Enjoyment? It is your job to be involved in the process of getting the right location, facility, improvements and price. It is the lawyer's job to be involved with the "other" issues. There are many opportunities to end up in trouble. Examples: Issues with what is included and how it is calculated arise in the category of Additional Rent; Dispute Resolution provisions, unless crafted correctly, can make it simply too expensive and cumbersome for the average tenant to take the landlord to task when a genuine dispute arises; Renewal Options can be a critical requirement for most tenants but are the right issues being addressed? And, you really do need a Covenant of Quiet Enjoyment.


  4. It's Just Our Standard Lease. If there ever was, there certainly is no longer such a thing as the "Standard Lease." Assuming the landlord is motivated, a landlord's standard lease becomes quite changeable. The trick is to have the experience and knowledge base to know what is generally negotiable given current market conditions, etc.


  5. This Will Only Work If It Is Good For Both Of Us. Landlords and tenants have fundamentally opposing priorities. Landlords want maximum revenue with minimum risks and obligations. Sayings like "this will only work if it is good for both of us" and "this will be a win/win situation" miss the point entirely. Put another way, trust in God and build on high ground. It is not the landlord's job to look out for your best interests. It is your job. And, to do the job right, you need the right tools.


  6. But My Broker Can Do The Job. Putting aside the unauthorized practice of law issue, a real estate broker/agent/consultant can be an extremely valuable asset when it comes to the process of leasing or renewing a lease. However, the really good real estate professionals will be the first to recommend that you also use an attorney in the process. What you want, as the tenant, is the multiplier effect resulting from a good real estate professional and a good lawyer working together to get you the best package possible given the circumstances.


I have negotiated real estate leases for over thirty years. Market conditions have gone all over the place during this period of time. Particular issues have become more important and other issues less importance during this period of time. The one constant has been that the better prepared tenant will always get the better deal. And, the "deal" is a whole lot more than the cost per square foot.