A. INTRODUCTION
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- 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