Commercial leases are often long complex documents which set forth the rights and obligations of two commercial entities (Landlord and Tenant) with respect to a specific piece of property. In the event of a dispute between the parties, generally the first document looked at to resolve any dispute is the Lease Agreement. Whether you are a Landlord or a Tenant, it is essential that your Lease Agreement protects you against the likely issues you are to encounter during the tenancy.
Our office is experienced in the review and preparation of commercial leases with respect to both residential and commercial properties. We can help you assess what is unique and important about your business or property and help you properly address those issues in you lease agreement.
We also have extensive experience in litigation arising from Commercial Leases especially with respect to defense, indemnity and hold-harmless provisions of commercial leases.
There is no such thing as a “standard” lease.
Yes, form leases do exist, but every business, building, property, tenant and owner have different needs and issues and the lease presented most likely does not necessarily fit your needs. The only “true” “standard lease” is one that you have developed over the years that is specifically suited for your property or business, and that has been tweaked to deal with the disputes, problems and difficulties you have encountered over years of business. Therefore, it is essential that when you prepare and/or review a lease for your property or business, you do so with the proper foresight to protect your interests. Every lease should be drafted to protect the rights of the particular landlord and tenant involved.
Leases are Negotiable
The negotiability of a lease is dependent upon your bargaining position. How long has the property been vacant? Are there multiple parties looking to rent the property? Every lease term is potentially negotiable, including rent, lease term, options to renew, early termination, personal guaranty, landlord improvements, major repairs, CAM Charges, rent concessions, and arbitration of disputes. There are no “required terms”. The key is knowing your relative bargaining position and focusing on the key lease terms that will impact you. As experienced commercial lease attorneys, we can help you assess your needs and focus on the most important terms and most effective way to customize your lease to your business or property.
Common Lease Provisions
Unlike with residential leases, which are generally only for a year at a time, commercial leases often last for five, ten or twenty years. Additionally, with such long lease terms it is common for properties to be sold by the Landlord during the term of the Lease or for the Tenant to sell the business to a new buyer, leaving the Lease Agreement as the primary document controlling the ongoing relationship between the new parties. These factors can lead to issues between landlord and tenant and a “standard lease form” may not be enough to protect the interests of the parties involved. Common areas to review, discuss and potentially modify in a commercial lease include:
- How will the premises be used by the tenant?
- Can the tenant change use over time?
- What signage is the tenant allowed to put up?
- Can the tenant sublet the property? If so, under what conditions?
- What are the landlord responsibilities with respect major repairs/replacement of the roof, plumbing, electrical or structure mechanical systems?
- Is there an option to renew the lease?
- Can the lease be terminate before the end of the lease?
- What if there is a fire or other casualty?
- What are the Landlords obligations with regard to the security deposit?
- Is there a cap on rent increases?
- How are CAM charges calculated?
- Are the cost of utilities to be shared by multiple tenants? Are they to be paid for by the landlord?
- Who is responsible for paying property taxes?
- Who is responsible for the maintenance of common areas and the parking lot?
- What improvements can the tenant make to the property?
- What improvements is the Landlord responsible for at the start of the lease?
- Is the tenant personally liable under the lease?
Commercial leases are lengthy, complicated documents that are difficult to read and understand. You should always be leery of accepting a lease as presented. There is no substitute for reviewing a lease with an experienced New Jersey commercial real estate lawyer. We can help you sort through the minute details of a commercial real estate lease and suggest edits, language to be removed, language to be added and help you better understand a document that can bind you and your business for many years.
What Are Common Area Maintenance (CAM) Charges In A Commercial Lease?
Most commercial leases are triple net leases, meaning that the tenant pays for (i) taxes (ii) insurance and (iii) maintenance. Generally, under a triple net lease, the landlord will pass through all of the expenses to maintain the property including landscaping, cleanup, snow removal and minor repairs to each tenant on a pro-rata basis. The CAM charges in a commercial lease are typically added on to base rent as additional rent (in addition to the taxes and insurance cost). The CAM provisions of a lease are often some of the most complicated lease language, and a part of the lease that most tenants do not fully understand. Commercial Landlords typically attempt to pass through as much of their expenses as possible through CAM charges. While there is nothing improper about this practice, it is important for tenants to understand what charges they will be paying, how these coats are calculated, and how they can increase (sometimes dramatically) over time.
CAM charges that should be questions be a tenant include, Administrative Fees, Roof Replacement, Capital Improvements, HVAC replacement, major plumbing and electrical repairs. Also, what rights does a tenant have to examine the books and record of the landlord to determine if the CAM charges have been properly assessed? We can help you understand and negotiate these terms in your lease.
Do you have the time and the knowledge to look over every single word of the lease yourself in case your landlord has tried to skew the lease in his or her favor? Call our Basking Ridge Commercial Lease Attorneys for Help.