What to check for in a lease before signing on the dotted line

 

Given that most commercial real estate leases are upwards of 40 pages long, it’s easy to miss the few most important points that can truly affect the running of your business throughout your stay in your new office. It’s easy and common for tenants to get caught up with the legal jargon of every single word written in a lease and get scared or uncomfortable with signing a lease. Keeping it simple and understanding the below points will not only save you hundreds of dollars in legal fee’s, get a good night sleep but also save you time getting passed the review period of a lease and getting the deal done.

1. Electricity: Make sure you read the fine print when it comes to electricity in your new office space. Understanding how electricity is billed, who’s responsible for providing  (Coned or landlord) and any electricity $ increases throughout the term of the lease are points which you should understand. If you’re not careful, the number that you’re quoted could go up as much as 50% in a 5 year period. For example, on the day you move in, you could be paying $3.50/square foot for a 5,000 square foot space but if electric is bundled with your base rent which escalates 3% per year then so will your electricity bill.

2. Freight Elevator Time: When you move into your new building, you can’t just lug desks up the normal passenger elevator. You’re required to use the freight elevator, and unfortunately, this happens after business hours. This means that any moving has to be done after 5PM or on weekends. If you’re not careful, your landlord may charge you for the usage of the freight elevator, as well as for a union guard to be present. Make sure to be clear on what the move in rules and costs are of your new building.

3. Light bulbs/Miscellaneous Maintenance: If you don’t read your lease carefully, your landlord might just include a clause that dictates that only their workers can change the light bulbs in your office space. That means they could potentially charge you $200 every time a light burns out. It sounds ridiculous, but if you don’t have it written into your lease that you, as the tenant, have the ability to change your own light bulbs, you’re looking at racking up dollar signs pretty quickly.

4. Real Estate Taxes: It is of the utmost importance to understand how your landlord came up with your “proportionate share of real estate taxes” figure. Asking for the calculation is a not a common question asked which surprises me that even most attorney’s dont ask to get. For this reason always make sure to ask and confirm the percentage given to you. To read more on how proportionate shares are calculated, click here.

5. Preexisting Condition Clause: Most leases have a clause that states that when you move out of your office space, you must deliver it back to the landlord in its preexisting condition. That means all walls you paid to put up must come down. All that specific task lighting you had installed must be uninstalled. That vibrant paint must be returned to standard white. These sorts of expenses are negotiable, but don’t count them out – the more work you do, the more you could be paying to undo in the coming years.

6. Relocation Clause: Although most lease don’t include this clause, it is always advised that if your lease does that you understand and negotiate certain points within it. First of make sure that you ask for this clause be removed but should it not be able to, be sure to have wording added stating that (1) landlord may only use this clause once throughout the entirety of the lease (2) that landlord has to provide you with at least 120 days notice (3) landlord must move you to a similar space with similar views, window line and style and (4)  that landlord will be responsible for printing payment for new business cards, letter heads and all marketing material you use.

7. Good Guy Guarantee (GGG): Good Guy clauses are a common clause within all New York City leases that act as an incentive to the Tenant to vacate when he/she can no longer afford to pay the rent, and permits the Landlord to mitigate his damages. Without it, tenants can squat for ages without paying rent. In addition, Landlord’s don’t usually spend good money chasing bad. If the company has vacated there’s a reason for it and most Landlords won’t spend thousand’s of $’s trying to collect rent from a defunct company. However, one important point that tenants should negotiated is the amount of vacancy notice needed to be given to landlord when terminating lease. Minimizing the amount of notice will minimize your risk and further limit any personal liabilities. To read more about GGG's and read some examples please click here.

-Writen by David Gomez

Fountain Realty Group 

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