A. INTRODUCTION

    • Differences with residential vs. commercial real estate leases
    • Residential leases more consumer protected.
    • Commercial leases are negotiable
    • More business to business perspective
    • This session is not all inclusive of all clauses important to a landlord but a sample.

B. PARTIES CLAUSE

  • Legal name and address of the tenant
  • Tenant capacity to execute agreement
  • Corporate Resolution or Clerk’s Certificate
  • Accurate names, address, states of incorporation
  • Is the tenant name a “shell” or “parent”?
  • Certificate of Good Standing
  • Names to match with the signature page

C. DEATH CLAUSE

  • Tenant lease termination upon death
  • Sole proprietor or core person in a small company
  • Termination may be due to sickness or incapacitation
  • Would affect the parties clause
  • Would affect lease obligations to an estate or other entities.
  • Tenant imposed termination language
  • States that lease is automatically null and void based on events
  • Difficult for landlord to finance or sell building

D. EXCLUSIVITY AND PROHIBITED USES

  • Often associated in retail leases but not always
  • Will protect the tenant from competition
  • Can be damaging to a landlord
  • May include restrictions on leasing to certain competitors
  • May prohibit competitors from the same building as tenant with the rights
  • Problems of competitors in building with recruiting other employees
  • Might be embarrassing if competitor’s name is on tenant’s building.
  • Impose restrictions of certain uses including subletting.
  • Restricting uses not in the best interest of the property/building tenants.
  • Applied for signage rights
  • Examples of penalties violation
  • Examples: termination rights, rent abatement; rent reduction
  • Landlord to avoid exclusives. Difficult to enforce.

E. RADIUS RESTRICTIONS

  • Restrictions on landlord leasing to tenant competitor within an agreed trade area
  • Tenant agreement to not operate in agreed trade area
  • More prominent in retail leases
  • Need to define radius
  • Issues of tenants with multiple partners and new start-ups under different names
  • Affects landlord’s percent rents, free trade and marketing other space.

F. CO-TENANCY

  • Tenant demands of an anchor tenant presence
  • Penalties imposed on the landlord
  • Demands for specific tenants to remain in center
  • Rights to terminate as penalty
  • More prevalent with in-line tenants
  • Landlord wants rights to replace an anchor tenant.
  • Tenant may restrict the time for replacement and the type of tenant

G. BROKERAGE CLAUSE

  • Notice of real estate brokers entitled to commission
  • States who will pay the brokers.
  • States the real estate brokers of record
  • Brokers may be asked to sign the lease
  • Issues with third party “parachute” broker
  • States when brokers will be paid
  • Often the fee amount is per a separate letter agreement
  • There is no legal standard on fee structure or timing of payment
  • Brokers to hold valid and active licenses in Massachusetts for a fee

H. RELOCATION CLAUSE

  • May serve as landlord’s “buy-out” or “buy-down” option.
  • Gives landlord the right to relocate tenants during tenancy
  • Relocation in the building or campus park.
  • States landlord obligations for tenant relocation expenses
  • Examples moving costs, stationary, telecommunications.
  • Other landlord issues: tenant business interruption, loss of productivity, loss of clients, printing fees, equipment installations, loss of image or its utility in the space, goodwill, lose of sales, etc.
  • Tenant may want comparable space.
  • A need for arbitrarily exercise.
  • Tenant wants to restrict relocation language
  • Tenant need for advanced notice, reason for the move, specified proposed new location; same square footage; rent adjustments; paid moving costs and limit frequency
  • Limit landlord relocation rights

I. HAZARDOUS WASTE/ENVIRONMENTAL ISSUES

  • Stipulates tenant will not create or possess hazardous waste in the building
  • Defines hazardous substance and penalties.
  • Landlord need for protection from environmental liens on the property
  • Landlord need to limit financing damage and sale of a property.
  • Review MGL Chapter 21E
  • Landlord review of tenant’s operation and material
  • Tenant should be aware of other tenants that could be in violation
  • January 2009 can now hold owner responsible even if owner has protection
  • Examples of tenant exclusions
  • Review AUL (Activity and Use Limitations) issues
  • Landlord requirement to list AULs in commercial lease
  • Tenant right for assessment report status an setting baseline report

J. PARKING

  • Designates an area for tenants, employees and guests to park vehicles or trucks
  • States time allowed, days of week and other rules.
  • Issues for landlord offering exclusive parking
  • Landlord lease language for common parking, non-exclusive, non-designated basis
  • Differences of Designated vs. Allotted
  • State first come, first serve
  • Issues for overflow parking in retail
  • Other items to address: weekend parking and customer parking
  • Difference issues between office v. retail buildings
  • Addressing employee density and parking space allotment.
  • Advantages to state cars per 1,000 sf or a specific number of parking spaces.
  • Zoning restrict issues with expansion of parking or tenant’s use
  • Other key issues for landlord
  • Parking definition, covered parking, visitor parking
  • Discouraging parking and encouraging use of mass transit
  • Snow pile issues with parking allocation
  • Eminent domain issues