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Percentage rent leases commonly permit tenants to deduct or exclude certain kinds of transactions that don’t generate a profit for the tenant from the gross sales on which percentage rent is due. Typical examples include revenues from gift wrapping, deliveries, repairs to items purchased from the tenant, and discount sales to employees. The problem is that these services and sales may, in fact, generate significant revenue and profits.
Percentage rent leases commonly permit tenants to deduct or exclude certain kinds of transactions that don’t generate a profit for the tenant from the gross sales on which percentage rent is due. Typical examples include revenues from gift wrapping, deliveries, repairs to items purchased from the tenant, and discount sales to employees. The problem is that these services and sales may, in fact, generate significant revenue and profits.
Federal and state laws make property owners liable for environmental damage done by a tenant. That makes it imperative to verify that tenants comply with those laws. But a tenant may refuse to grant you access to inspect or perform environmental testing for that purpose. And without clear lease language ensuring such access, you could be literally and figuratively locked out in your quest for verification of environmental compliance, leaving you exposed to millions of dollars in potential liability.
Federal and state laws make property owners liable for environmental damage done by a tenant. That makes it imperative to verify that tenants comply with those laws. But a tenant may refuse to grant you access to inspect or perform environmental testing for that purpose. And without clear lease language ensuring such access, you could be literally and figuratively locked out in your quest for verification of environmental compliance, leaving you exposed to millions of dollars in potential liability.
Delays are apt to occur any time you perform pre-move-in construction work for a new tenant. Such delays may result in your not being able to complete the work by the date the tenant is required to begin paying rent under the lease. To protect tenants in the event of such a contingency, leases typically say that the duty to pay rent doesn’t kick in unless and until the work is “substantially complete.” That seems to be a fair rule, as long as it was your own staff or contractors that caused the delay.
“Is my landlord going to drag its feet if I try to assign or sublet the lease?” That’s a question that has kept many a tenant lying awake in bed at night. Rather than risk a delay that might ultimately cost them the assignment or sublease, these tenants may insist on requiring the landlord to say yes or no to the request within a specific time limit, like 30 days. They also want the lease to state that failure to respond within the specified time limit counts as a “yes.” And if the tenant has enough bargaining clout, you may have to accept its demands.
Boilerplate language requiring tenants to get your consent to assign the lease may not be enough to guarantee your right to consent to future assignments. Thus, in saying yes to a lease assignment, you may be inadvertently consenting to all of the subsequent assignments that the assignee chooses to make. Result: You lose control over which business occupies the premises for the rest of the lease term.
Do you grant your tenants the option to purchase the leased premises? If you’re using a standard lease form to provide such an option, you might also be inadvertently giving the tenant an unexpected windfall: one or more months of free rent in the months after it exercises the option. Here’s a look at the loophole and how to plug it.
In many states, the lease guaranty ends when the underlying lease ends. So, unless there’s language to the contrary, the guarantor is off the hook if the tenant holds over after the end of the term or renews the lease. That leaves you holding the bag for any tenant defaults that occur during the holdover or renewal term. The good news is that as long as you’re aware of this loophole, you can easily plug it by including the right language in the guaranty agreement.
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