Hire An Attorney At Lease Review

Reading a lease can be daunting and time consuming. But it's an important document and you should know what you're agreeing to when you sign the bottom line. But you're thinking: "I've rented half a dozen apartments without a lawyer. Why do I need to hire one for this tiny office?"

The simple answer comes down to the difference in regulations governing residential and commercial real estate. In residential, if your landlord doesn't deal with a maintenance issue, there is a local rental board that specializes in tenant rights. In commercial real estate, the lease is a formal contract and sets the legal terms moving forward without much regulation.

What does this mean to you?

I have seen extremely landlord-friendly leases that tenants sign without knowing what they are giving up. Some examples of things to look for:

-Holdover: Landlords don't like companies staying long term on a month-to-month lease. To prevent that, they add a clause called Holdover which sets the rent for month-to-month terms after your initial lease expires. Landlords typically ask for 150% but it can and should be negotiated.

-Percentage rent: For retail space, landlords will attempt to receive a percentage of your total sales revenue. I've seen landlords ask for a percentage of the sale price if you sell your business during your lease term.

-Restoration Clauses: Most landlords will ask to approve any improvements completed in the space. What a business needs to be careful of is creating a situation where a landlord demands that a space is restored to its past condition.

-Code Compliance: Spaces need to meet local codes but those codes change constantly. It's important to make sure that you don't agree to bring a landlord's building up to code for improvements you're doing to your space. ADA compliance is very expensive and you do not want to bear the brunt of those costs.

-Personal Guarantees: Landlords will typically ask small office and retail users to guarantee a lease. This is not optimal but sometimes can't be avoided. If you do agree to one, try to have it scale down over time.

These are but a few issues to watch out for, but there are many others. A real estate attorney can help you identify important issues and make sure that you are signing a fair document.

Good luck and feel free to email support@rofo.com with any specific questions.

Last updated: 04.29.2009 04:05 PM

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