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When listing your remedies in a lease clause—for example, the option to terminate the tenant’s lease if the tenant stops operating its business—always start with the phrase: “In addition to any other rights and remedies available to Landlord under this Lease or at law or in equity….” You should use this phrase because it gives you the right to resort to many types of remedies—not just the ones you’re listing in the particular clause.
Be careful how you describe the termination right you give a tenant. If you grant the tenant a right to terminate its lease in the event its business is sold, for example, make sure the tenant is required to exercise that right within a specific time period of the sale date. Consider what happened to an owner in a recent case that involved a similar termination right: A New Jersey appeals court determined that the tenant’s termination right was “ongoing” and could last for years—a nightmare for the owner of the premises.
It’s common in most leases to end a list of items with the phrase “including, without limitation,” or “including, but not limited to.” Those phrases are meant to indicate that the list isn’t exhaustive. But if you forget to use them consistently throughout the lease, it can lead to confusion and misunderstanding. Avoid that situation by adding the following language to the definitions section of your lease:
If, like many shopping center owners, you provide off-site traffic improvements for your tenants, you should make sure that you’re compensated for that. After all, these improvements—for example, special signage and lighting in areas leading to the property or a way to control the flow of vehicles into and out of the center—benefit both owners and tenants by helping increase customer traffic, boost sales, and reduce the risk of accidents.
While many commercial leases are for several-year terms, it might behoove you to agree to a month-to-month tenancy with a tenant. Month-to-month tenants can be part of a strategic plan for your property, especially if you have spaces that you’d like to collect rent for in the short term while looking for longer term tenants. If you rent a space on a month-to-month basis to a tenant without a lease, don’t take termination of the tenancy less seriously than you would for a long-term lease.
Some office building or mall owners put out “wet floor” signs during rainy or snowy weather to warn customers about slippery conditions that could quickly develop on the floors of the property. In just a few minutes, water can collect, creating a hazard. It’s important to be cognizant of potential areas for liability, but make sure to consult your attorney about what precautions you should take as far as these types of warnings are concerned.
Sometimes a clerical mistake, such as an incorrect date or a misspelled name, is made on a lease document. But if the mistake isn’t caught and corrected, it can lead to a dispute later between you and your tenant—especially if the mistake works in the tenant’s favor and it’s trying to cash in on the error. That’s why it’s important to carefully review the final document for your lease deals. And, if you catch a mistake, don’t correct it by hand and initial the correction.
You may have a “wish list” for items you would like to include in your lease with a prospective tenant, but be careful not to overdo it. Big box tenants or those with a lot of bargaining power are more likely to balk at requests for things that are too owner friendly, but continue negotiations knowing they will get a deal they can live with. But asking for items that are blatantly unfair from smaller tenants, like mom-and-pop stores or new businesses, can hurt you.
Don’t rely on an “implied” continuous operations covenant—that is, one that isn’t expressly stated in the lease—if you want your retail tenant to continuously operate from its space. Some courts might find that one exists anyway in certain situations, such as when the lease requires a long-term tenant to pay a minimal base rent but substantial percentage rent, limits the tenant’s use and ability to assign and sublet, and bars competition.
If you’re negotiating a lease with a tenant that primarily sells consumer electronics and appliances, don’t agree to exclude sales of extended warranties, subscriptions, repairs, delivery, and other services from the definition of “gross sales.” Those sales can represent a significant percentage of the tenant’s overall sales depending on the size of the store and the mix of merchandise available there.
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