Traps to Avoid

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It’s neither contradictory nor uncommon to lease space to a tenant in “as-is” condition while also promising to maintain some or all of that space, such as the roof or parking lot, until the transfer is complete. You just need to be careful about how you word the obligation.

Not stating the specifics is likely to lead to two results, both of them negative.

Not stating the specifics is likely to lead to two results, both of them negative.

We’ll give you three ways to protect yourself.

Marketing brochures and communications that describe your property, its amenities, and tenant mix are instrumental to attracting new tenants. But they can also get you into trouble if the information they contain is inaccurate. The risk is that disgruntled tenants may seize upon these inaccuracies to seek to get out of their lease and/or sue you for damages.

Offering an exclusive can help you lure new tenants. But offering the wrong kind of exclusive can cost you a renewal. SNAFUs are apt to occur when you use a common form of exclusive stating that the tenant is the only tenant in the shopping center that’s allowed to sell a particular product. The problem is that the leases of your current tenants may not include any provisions expressly limiting what they’re allowed to sell.

A signed letter of intent (LOI) is often the preliminary step to a commercial lease. The LOI typically requires the sides to keep the deal confidential while outlining the crucial terms of the lease they both ultimately intend to sign. However, while it may feel like a commitment, the LOI is less than ironclad. Parties may still change their mind either on the lease terms or whether they want to sign a lease at all.

Tenants that must pay common area maintenance (CAM) or operating costs typically want assurances that landlords will keep those expenses reasonable and in line with the average costs that owners of other shopping centers or office buildings in the area pay. And if the tenant has bargaining clout, you’ll have to give in to its demands. The typical result is a commitment by the landlord to hire contractors and service vendors that are “competitively” priced.

Finding a financially stable tenant that you know won’t go out of business and will have the financial resources to pay its rent every month no matter how long the lease lasts is every commercial landlord’s dream, especially in these tough economic times. That’s why it might be very appealing to lease space in your building or center to a government agency. Just be very careful if you do. While government tenants may be immune to economic trends, they may also be immune to something else: some of the terms of your lease.

Tenants that must pay common area maintenance (CAM) or operating costs typically want assurances that landlords will keep those expenses reasonable and in line with the average costs that owners of other shopping centers or office buildings in the area pay. And if the tenant has bargaining clout, you’ll have to give in to their demands. The typical result is a commitment by the landlord to hire contractors and service vendors that are “competitively” priced.

It’s a clause that almost every commercial lease contains, yet rarely gets even 10 seconds of attention. The clause says something to the effect that “Landlord has made no representations to Tenant other than those contained in the terms expressly stated in this Lease.” The idea of the “no representations” clause is to bar tenants from claiming that the landlord made false representations about the premises before the deal was signed.