To most commercial tenants, a lease contract is a 45 page monster with the deal points on page one, the signatures on the last page and mountains of legalese in between. But there are different types of deal structures and an appropriate lease for each. A retail lease addressing shopping center operating expense reimbursements and percentage rents based on sales will not be appropriate for an industrial tenant occupying a free-standing building. That’s an easy call. But sometimes there are problems with more nuanced contradictions. It might be inappropriate language addressing maintenance responsibilities or the use of a very old lease form; in both cases, a sometimes lengthy lease addendum is needed to correct and clarify. If that addendum is not worded carefully, the language contradictions may not be clarified or even be made worse. Typically, the landlord provides the lease form so it is up to the tenant and their broker to look at the lease contract very closely.
Join me in the weeds for just a moment. I just negotiated (more like “hammered out”) a warehouse lease at a multi-tenant property where the broker said the landlord covered all operating expenses but just charged the tenants a modest and reasonable common area maintenance fee. But when the lease draft arrived, it was a “net” lease form that called for the pass through of all property expenses including reserves for replacement and structural building repairs. There was a sentence in the addendum that set forth the tenant’s modest monthly charge but no language that refuted the language in the lease. Furthermore, there were several other sections of the lease that alluded to the landlord’s maintenance responsibilities “subject to reimbursement as set forth in Section ‘X’” where said maintenance, such as roof repairs were included in the definition of common area maintenance. As the tenant’s broker, I had to struggle with the other broker to make sure the proper language was crafted for the addendum to clarify exactly what costs the tenant was responsible for.
A good tenant representation broker will look at the lease with the eyes of a “tryer of fact”; that is a judge in Superior Court or arbitration. I feel sorry for the other tenants in the project that didn’t read the lease closely or accepted the “don’t worry about it” assurances of the landlord’s broker and who find themselves in court fighting charges they were told they did not have to worry about.
In this case, it was a hassle but the tenant signed a lease that accurately reflected the deal that was negotiated.