Volume 17 Issue 4 -- July/August 2005
One of the most frustrating things a lawyer can hear is when a client says, “I signed this lease. Would you review it?”
A lease is a contract, basically, and once signed by landlord and tenant, it is usually enforceable as written. The time to review a lease is before it is signed.
If a lease is excessively restrictive as it relates to permitted uses of the rented space, an amendment (or change) should be negotiated and reduced to writing prior to signing. We will address some points to be aware of when signing a lease.
In large, commercial buildings and shopping centers, the owners will most likely use a form lease. A form lease is usually long and detailed with spaces to write in the name of the tenant, the area, the rent and other items. Even in other situations, however, landlords may use form leases, although the forms may come from a variety of sources and may vary considerably in quality.
The first question a prospective tenant needs to ask is, “Is the form amendable?” In other words, can the landlord and tenant negotiate and add a provision, such as having the air-conditioning turned on during weekends, or change provisions that conflict with the tenant’s business or are unsuitable for the tenant?
If there is a shortage of rentable space, the landlord may not be receptive to any changes, because another tenant can be easily found. Some unsophisticated landlords may be under the mistaken belief that the lease will somehow not be valid if they change any provisions of the form.
If, for whatever reasons, the landlord is not prepared to accept any modifications in the lease, there is little need for a professional to review a lease except to make sure that the client understands what he or she is getting himself or herself into.
Unfortunately, clients are often reluctant to pay for reviewing a lease when changes are prohibited.
There are many types of leases for various purposes such as: residential, industrial, warehouse, retail, etc. Watch out for the “one-trick pony” lease.
Sometimes a residential lease will be used for a restaurant lease because this form is the only one the agent knows. Such misused forms can lead to serious problems.
For example, in one situation a client, who operated a restaurant which we call “Oda’s,” signed an office lease which stated that the air conditioning would be turned off at While that might be a very reasonable provision in an office building, Oda’s operated a restaurant and remained open most evenings until The problem is obvious – sweaty, unhappy patrons.
A sublease, if allowed, permits the tenant to rent to a subtenant, namely a tenant of the tenant. Most leases prohibit subleasing without the permission of the landlord. The ability to sublease may be critically important if the tenant leases too much space too soon and needs to sublease while a business is growing. Those interested in subleasing a place need to check the tenant’s lease to see if subleases are permitted.
Another problem is that sometimes the subtenant will move in without the permission of the landlord. When the landlord hears about the unauthorized tenants, problems usually arise.
If a tenant makes improvements to the building, i.e., a new tiled floor, the improvements will be owned by the landlord when the lease ends, unless the lease provides otherwise. This is usually true even if the landlord did not shell out one penny for the tiled floor. A tenant expecting to make significant improvements in the space should make sure, before signing the lease, either that the landlord will provide some compensation for the improvements or that the tenant can afford to give the improvements to the landlord for nothing.
Surprisingly, some tenants have no lease. A written lease, even if problematic, usually nails down the lease term and provisions for renewal. Businesses operating with no written lease can encounter significant and expensive problems if the landlord decides to terminate the lease on short notice. For a discussion of such problems, please refer to the July/August 1997 issue of Tax & Business Insights, entitled “Business Succession – Mary’s Morass.”
If you or your clients need assistance regarding leasing problems, please call The Tax & Business Professionals, Inc.
By Tax and Business Professionals, Inc.
9837 Business Way
Manassas, VA 20110
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