Watch Out For Forgotten Items In A Commercial Office Lease

commercial office lease
Look out for these commercial office lease gotchas

I have negotiated many Dallas office leases in the past thirty years and most leases are professionally prepared by the landlord’s agents. However, there are a few times over my career that I have seen a lease document that has important items that are overlooked and can cause problems for the tenant.

Keep in mind, that sometimes the best negotiator cannot get these items revised in a lease. Sometimes a soft office market will give the tenant representation broker the opportunity to get these important items revised an many others.

I think these items are often overlooked to the detriment of the office tenant:

  • Premises Definition
  • Square Footage
  • Relocation Clause
  • As-Is

Commercial Office Lease – Premises Definition

During an intense lease negotiation an attorney is focused on the important legal language that is in the lease. Many hours are invested in reviewing and modifying the lease language so that it is appropriate for the tenant.

The landlord completes the lease document and delivers it for signature. The lease describes the lead premises and usually refers to an exhibit. In most leases it is Exhibit A of the lease. While all the legal language is excellent a simple space plan outlining the exact location of the leased premises is forgotten. Inmost cases this can easily be corrected after the lease is executed. This could be a big error if the landlord claims they had a different understand of the premises location. Be certain to review your lease and check the exhibit that defines the location.

Lease Definition – Square Footage

Usually the square footage of a leased space can be found on the first or second page of the lease. This number is financially important to the tenant because it is used for rental calculations, operating expenses and electricity reimbursements.

Review the commercial office lease carefully to see if the landlord has the right to remeasure the square footage and alter the charges that will be paid by the tenant. Usually the landlord’s standard lease document will give them the right to remeasure. The results are normally in the landlord’s favor so it is best to remove this clause from the lease.

Office Lease – Relocation Clause

A landlord will have a lease designed so that it is looking out for his best interests. While he is excited to lease you a third of twentieth floor today a better opportunity my present itself tomorrow. If a tenant came along two weeks after you signed a lease for the twentieth floor with the view you desired and they want to lease the entire floor and your lease has a relocation clause then you are going to be in a different space.

I have found that landlord’s are reluctant to give up this right. They like the ability to increase the value of their office building by relocating you. So the way to protect yourself if you cannot get the clause removed is to limit the landlord’s options.

For example, you like the view from the twentieth floor. So state that the landlord can relocate you but no lower than the twentieth floor and the space must located at the same spot on the new floor plate so you have the same view.

Commercial Office Lease – As-Is

After reviewing the lease you may see some language that states the tenant takes the space in its “As-Is” condition. Be very careful with this language because you are committing yourself to accepting the space in its present condition.

If a space is ten years old it may not comply with new city codes and regulations. When you apply for your certificate of occupancy it could be denied by the city until the space is brought up to new standards. Since you accepted the space in “As-Is” condition you will be required to bring the space up to the new city standards, not the landlord.

There are many more items to consider when looking at a commercial office lease. Always have an attorney review your lease document. I promise you that your landlord hired a competent attorny to draft the lease they are presenting to you.

A good office tenant representative can help with the negotiation of the business terms and conditions. He can also help your attorney assist you to review the lease and make sure everything regarding the business terms and conditions are equal with current market transactions.

You make also want to read our other articles relating to commercial office leasing:

Why rentable square feet and not usable? – Sometimes there is a little confusion regarding the concept of rentable square feet over usable square feet. This article answers that question.

Tenant Improvement Allowance Negotiations – Understand how to negotiate your tenant improvement allowances to get the most benefit for your company.

Leasing Problems To Avoid – These are common mistakes that I see tenants make in their lease negotiations that are easy to avoid.

 

 

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