Estate Planning and Business Law

A Few Considerations in Commercial Leasing

Types of Retail leases

  1. Free-Standing Building Not located in Shopping Center
  2. Multitenant Building Not Located in Shopping Center
  3. Shopping Center (enclosed malls, open-air centers, and special purpose shopping centers)
  4. Gross, Net, Triple Net Lease(Bond Lease)

Why have an Attorney for Commercial Leasing

Commercial leasing, unlike residential leasing, has many ins and outs, liabilities, contract writing and negotiation, desires and needs of landlords as well as tenants. To the uniformed tenant, and even those highly informed, knowledge of all laws while writing lease drafts, leases, as well as business planning can be a hefty task.

Attorneys with commercial real estate knowledge can help perspective tenants with lease drafting, negotiation, and extensive knowledge on all provision stated in the lease and silent within the lease. Because many landlords may favor big box retailers, it is in the best interest of an intended tenant to work with an attorney for better forms of negotiation and having a professional walk you through all of the legalities of renting as well as remind you of what should or shouldn’t be part of a lease.

Negotiating Strategies and Techniques

Often times, Landlords of multi-business shopping centers will have their own lease form prepared for uniformity purposes, which makes for a hard negotiation. In these cases, attorneys try to produce an initial draft of a lease when they are experienced in their practice, for a chance at easier lease negotiation.

Drafting a Lease

The most basic structure of writing as lease is as follows; The basic terms of the lease, effective dates, identification of both the tenant and landlord, tenants trade name or name of business, description of shopping center from landlord, exhibited areas of premises in which the tenant is leasing, permitted usages of the property, options to extend, rent, percentage rent rate, other charges, such as common area maintenance or CAM charges, security deposit, acknowledgement of guarantor, Landlords address, tenants address, and the real estate managers contact information.

When drafting a lease with an attorney, there are a few things you should consider within that lease, as well as when you sign a lease drawn up by the landlord: Property taxes, landlords desire to maximize rent, open and closed hours of operation, needed insurance, utilities, maintenance of the premises, common area maintenance, tenant and landlords rights, as well as the terms of alterations and additions.

Early termination rights

Often referred to as “kick-out” clauses, and is previously drafted for assurance and protection of staying in the lease in a down economic climate, not generating enough sales, or increased pressures from competing businesses. Small business are usually not able to negotiate their early termination rights in the way that big retailers can. Although, landlords are often reluctant to grant the right of early termination if they have a financing plan on the building, in which the lender assumes that the rent will pay the loan. Likewise, a tenant should be opposed to landlords exercising early termination rights. This leaves an open space in which a landlord can “kick-out” a tenant at any time, and leads to the premature loss of store front for the tenant for things out of their control. With that, both parties can occur large costs with exercised early termination rights. Despite the opposition, both landlords and tenants can exercise their early termination rights in the event of unusual circumstances that can and do arise.

Blackwell, Santaella & Jahangiri, LLP specializes in business and corporate law, business, commercial and real estate litigation, estate planning, probate and elder law. We are located in San Ramon. We are open from 8:30 a.m. to 5 p.m., Monday to Friday. To make an appointment please call 925-359-3233.