Your Commercial Lease Is Signed, Now What?

Few items in a commercial office lease are as important and timely as paying your rent, operating expenses, and monthly parking. If not paid correctly and on time, a tenant will likely find themselves in a monetary default that could severely jeopardize their rights under the lease. Landlord-drafted leases lean heavily in the landlord's favor; negotiating fair and reasonable terms and conditions on behalf of the tenant is imperative.

To avoid limiting and possibly losing valuable rights under the lease, be mindful of the requirements for paying office and parking rents ("rent") and escalations (tenant's proportionate share of operating costs and taxes); they are all considered "rent" and handled accordingly by the landlord.

Understanding the time frame from which rent and escalations are due is critical. For example, are they due on the first of the month, or is there a three-day grace period? It is imperative to negotiate language that the landlord must provide "written" notice of a monetary default and allow the tenant the right to cure within a set time frame.

A material default under the lease may affect the tenant in myriad ways. For example, a default will negate a tenant's ability to exercise their option to renew; it can severely hamper sublease/assignment rights; affect parking privileges; and, in the worst case, allow for outright lease termination. Also, be aware that late rent payments and escalations come with steep fines and burdensome requirements for all future payments.

A sure-bet way to pay your rent on time is to pay by direct deposit; set this option up at the onset of the lease commencement. As for escalations, mark your calendar to keep an eye out for the landlord's escalation "reconciliation statement." Call the management company and inquire about its timing if you have not received the documentation by the end of April in any given year or the month the lease stipulates. Once the tenant has received the reconciliation, they should forward it to their broker for review and input.

The commercial lease document legally binds the parties. The purpose is to meticulously outline the details of the relationship, including the terms, timing, conditions, and responsibilities of both the landlord and tenant.

"If you’d like any more information on commercial leases, or if you have any questions or need assistance with your existing lease, do not hesitate to reach out to monique@cbi-commercial.com."

By-Line with Monique Lacey