5 Posts for Negotiating a Better Office Lease

by CoyDavidson on November 29, 2010

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Negotiate a More Balanced Lease Contract

A commercial office lease between a Landlord and Tenant is filled with a myriad of components that have significant financial and legal implications. Furthermore, lease documents are typically drafted by the Landlords’ legal counsel and by nature are biased in the building owners favor. Even the most savvy and sophisticated companies who employ real estate staff recognize the need to retain the assistance from both a tenant representative and real estate lawyer to assist in negotiating a more balanced lease contract.

In case you missed them, here are five posts from the archives that examine several often misunderstood or neglected components of the lease agreement.

Understanding the Common Area Factor: Rentable vs Useable Square Feet

Few commercial real estate concepts are as misunderstood by tenants and even real estate professionals, as the measurement of office space square footage for rent purposes. The formula to determine the amount of rent in most office leases incorporates both the usable square footage, plus the tenant’s proportionate share of common areas in the building.

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Rent is More than just Rent

Lease Agreements for a typical office building are complex contracts and most commercial leases provide a mechanism for common area maintenance and other building operating expenses (such as janitorial services, taxes and insurance) to be passed on to the tenant.  In office building leases, where separate utility metering is uncommon, utilities are also included in the pass through of expenses. These pass-throughs are often referred to as “Additional Rent”. Most office tenants recognize the concept of the building owners charging rent for the building operating expenses, but the language contained in the lease can be confusing, subjective in interpretation and filled with substantial financial exposure.

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Taking into Account the Unexpected when Negotiating your Commercial Lease

Natural disasters such as Hurricane Ike or Tropical Storm Allison that damaged many buildings in the Houston area can interrupt operations at hundreds of businesses. But even, inoperable or faulty building equipment, a sudden freeze that causes pipes to burst or a summer thunderstorm that cuts electrical power can bring a business to a halt.

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The Importance of Assignment and Subletting Clauses in Commercial Leases

Occasionally, a tenant prematurely vacates the leased premises. When negotiating your lease it may not seem to be a clause of primary importance. However, we don’t always foresee challenging economic times and given the amount of sublease space currently on the market only proves why it is critical to pay special to attention to these rights spelled out in the lease document and to maintain as much flexibility as possible to mitigate your lease obligation should business conditions dictate.

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SNDA’s in Commercial Leases

When negotiating commercial leases it is important for the Tenant to obtain a Subordination and Non-Disturbance Agreement, often referred to as the “SNDA” especially in today’s economic environment where foreclosure activity has significantly increased.

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