Reading Between the Lines - The Many Issues in Negotiating Commercial Real Estate Leases

September 7, 2007

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Commercial leases are not merely contracts, but often roadmaps to both a landlord's and a tenant's future business plan for a particular premises. Both parties should take ample time to contemplate, discuss and include within the lease, all such matters as could arise during tenancy. If you distill the complexities of commercial real estate leasing to the most basic notion, the most important thing to remember is that nearly everything is negotiable for both sides.

Unlike residential real estate leases that are strictly governed by statutes and case law, the world of commercial real estate leasing is generally left to the landlord and tenant to decide. As a result, the commercial lease agreement is the sole origin of each of the landlord's and tenant's respective rights and responsibilities for the lease term.

How much of a 'template' lease is negotiable be each such respective party? That often depends upon the leverage of the market and of the property being leased. For example, if the market has a significant amount of space for lease, the tenant will likely have the greater ability to dictate the lease terms. Conversely, in a market where one particular piece of property is unique, or where the market has less leasing inventory available, a tenant may find itself with less margin by which it can temper a landlord-favorable lease.

Below are some considerations relative to issues that tend to emerge during lease negotiations.

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Regardless of market conditions, it is essential that the landlord and tenant contemplate each aspect of the tenant's business, what the tenant's needs will be...

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by: Jeffrey I. Fialky, Esq.

BusinessWest
August 20, 2007

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