Once you and your broker sign the letter of intent, the landlord’s attorney will send you a draft lease within a week or two. The complexity of the lease depends on the type of property. Generally speaking, retail leases are the most complex, with office leases being a bit more straightforward and warehouse leases being the most straightforward. Irrespective of the type of lease, they all seem to be getting longer over the years, particularly after the economic downturn of 2008.
When landlord sends you the lease, it easily could be 50+ pages, especially with exhibits. For a person not in the real estate business, the lease can be a bit daunting. So, what do you do? Here’s a brief list of action items:
Review Business Terms. The tenant should review the lease to confirm that the business terms reflect the agreement with landlord. The businessperson will have the best knowledge regarding both the business deal and what is acceptable to the company. While the broker and lawyer will review these terms as well, the business owner is the only one who will be responsible to satisfy the terms, so it is worth the time to review.
Have Broker Review. Your broker is earning a hefty commission to get your lease done. As part of that fee, they should be taking an active involvement in the lease review and negotiation. A broker that simply puts together a letter of intent and is absent during the lease negotiation is not a benefit. Ask the broker to review and to provide feedback. The best brokers will review, prepare revisions to the draft, and will maintain an active involvement during the entire negotiation.
Hire a Lawyer to Review. Unless you are a lawyer or have an excellent understanding of the legal components to a lease, it is worth your time and money to hire a lawyer. A lawyer that focuses on leasing, particularly tenant leasing, will be able to help you negotiate the best deal and will help you navigate the subtle landmines in leases. Do not hesitate to negotiate the fee for your lease to have some scope of the overall cost.
Have Your Insurance Agent Review the Insurance Section. This often is overlooked, but your insurance agent should be brought into the lease process early. The best way to handle this is to cut and paste the insurance section of the lease right into an email to your agent. Having the agent review the terms and provide feedback will help you know what conflicts there are between your policy and the requirements of the lease. Handling this early will avoid any last-minute problems before you are ready to sign.
A lease is a huge obligation – many last 10+ years and carry a sizeable rent amount. It usually is the first or second biggest obligation of a company (payroll being the other). There almost always are landmines to navigate in a 50-page lease. Utilizing and hiring the best team for your lease project will help get you the best deal and the most user-friendly document you can.