It strikes us that a lot of lease forms have provisions that never make it to the end of the process. Basically, even the people who put the form “on the table” know the changes that will be made. Before decrying this part of the negotiating process, we’ll begin with some (ever) familiar examples (the “low hanging grapes”).
Our hope is that after you’ve read this pretty simple posting, you’ll go back to your own “sacred” forms and modernize them by making them say what they are goin to say anyway. Your reward may be a more quickly made deal at a lower transaction cost.
- How about the default clause that gives a party (usually the tenant) merely 20 days (or less) to cure a humdrum breach? Doesn’t that always get changed to 30 days?
- That same lease provision often “forgets” that a breach shouldn’t be a default if the (allegedly) breaching party has timely begun its cure and is still diligently prosecuting that cure. Doesn’t that always get changed?
- How about where the form lease says that failure to pay rent within 3 days after it is due will be an event of default? How often does “3” remain when a tenant objects? Isn’t this commonly 10 days? And, why don’t form leases speak of “after tenant’s receipt of notice that rent has not been received”? Yes, we know the arguments that (some, mostly, but not exclusively, junior) attorneys and other negotiators make: essentially, why should my client or company have to make the effort? We also know that every landlord will send a notice anyway. No one is evicting a tenant when the rent is only 3 days (or 10 days) late.
- And, since almost every lease holds off on a late charge for 10 or 15 days after notice is sent (perhaps with an annual limit of two such notices), why don’t form leases just start that way?
- How about rules and regulations (and for a discussion of that topic on a stand-alone basis, click HERE)? Why do negotiators have to spend time on having the lease say that they will be uniformly applicable (with some specific exceptions) and uniformly enforced?
- Should form leases recognize that tenants are going to use some hazardous materials for cleaning and maintenance and might be selling some (think of a supermarket)? Of course they should.
- Do landlords really intend to materially impair visibility of a tenant’s premises and signs? Tenants are going to (or should) ask for this protection. So, why doesn’t the form lease just come right out and says so?
- Everyone knows that a tenant isn’t going to pay for damage that is covered by its landlord’s insurance. [After all, the tenant is actually paying the premium.] So, why do some landlord lease forms start off by saying that tenants will do so?
- How about tenant forms that “forget” to give the landlord any self-help rights (after notice and opportunity to cure)?
- Then, there are the tenant forms that ran out of room for the landlord exculpation provision that will certainly be added.
ENOUGH FOR NOW. We could list at least a dozen more. So can nearly every one of our readers.
Readers may ask: “what’s the big deal”? After all, negotiating parties work these things out all the time. And, if a landlord or tenant isn’t sharp enough to ask for these things, “tough cookies.”
Well, here are some of the reasons why we think it is bone-headed and short-sighted to have a form that invites such overwhelmingly common changes.
- It just plain wastes everyone’s time, including that of the “word processor.”
- Doing so sets the wrong tone for an “adoption”; it sets a tone more commonly associated with a “divorce.”
- Yes, it starts negotiators off on an adversarial trail. Even little things matter.
- Using such forms makes it seem that the party initially reviewing a proposed lease has “hacked it up to shreds,” when that’s just not the case.
- Inexperienced negotiators are fooled into thinking that the form “must be right” and are fearful of making such simple and common changes, let alone dealing with meatier issues.
- Starting out this way gives everyone the false belief that they have “already compromised” their company’s or client’s positions. So, they have to be leery of “giving in” any further.
- The process leads to legitimate lease provision that, at a minimum, look like they were drafted by a committee and, at worst, are incomprehensible.
- Basically, it frustrates the negotiating parties, especially those who long, long ago realized how wasteful the process of getting a lease to the “real” starting point can be.
We’ve said enough for today. We’ve spoken our piece. Now, we invite you to challenge Ruminations on today’s blog entry. Our guess is that most readers have their own gripes to add to our (intentionally) limited list of examples. If you are inspired to do so, just add your comment by clicking just below the headline where it says “Leave Your Comment.”