Neither Landlords Nor Tenants Are Elephants

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It’s curious that landlords and tenants carefully craft their respective form leases, but often forget to include provisions that are included in almost every executed lease – at least, in almost every lease that the “other side” actually reviews. Yes, there are leases where the “forgotten” provisions are missing. Those are the ones that haven’t been reviewed by the other side or have only gotten a slap dash review. In those cases, you can’t expect that the “other side” will abide by the lease’s provisions. Here’s an unconditional statement: if the other side signs a lease as presented, you don’t want to do the deal.

Ruminations smiles, perhaps grins, as this is being written. Why do landlord-form leases forget to include provisions such as: (a) the landlord will carry property and liability insurance; (b) the landlord will pay the real estate taxes; (c) the landlord will indemnify the tenant for bad, damage-causing things done by the landlord; (d) the landlord will actually take care of the property (common areas) and the building; (e) the landlord will also waive claims for damage to its property and get a waiver of subrogation provision in its property insurance policy; (f) the tenant can audit the pass-through expenses such as common area costs and taxes; (g) the landlord will give the tenant estoppel certificates when requested; (h) the rules and regulations will be uniformly enforced and won’t be changed in a way that harms the tenant; (i) the tenant can use self-help after notice and a reasonable wait; (j) consents won’t be unreasonably withheld, delayed or conditioned; (k) the landlord will comply with laws, environmental, and otherwise; (l) that the property is free of unlawfully present hazardous substances; (m) the tenant is also entitled to get attorneys’ fees; (n) the security deposit will be returned within a given time after the lease term is over and successor landlords will be responsible for the security deposit; (o) if the building is seriously damaged, the tenant also can terminate the lease; and (p) that there are no other leases or agreements that would impair the tenant’s operation of its designated business.

There are more, but we’re not good enough to know what we’ve left off that shopping list.

And that list doesn’t include what should be in any lease to a tenant with any modicum of experience or knowledge. Those would include: (a) getting (or at least trying to get) an SNDA for the tenant; (b) there always will be entrances and exits; (c) there will be reasonably adequate parking; (d) visibility of the tenant’s signs and premises won’t be materially impaired; and (e) landlord’s entry into the premises won’t unreasonably interfere with its tenant’s business.

Other things that many landlords forget when they prepare their lease forms include leaving out common exclusions from common area costs and taxes that are charged back to the tenant. Yes, most form leases have a list, but those generally seem to be missing things we all know should be there, but aren’t.

Sometimes a landlord-form lease will look like it has one or more of those provisions, but close scrutiny reveals otherwise. For example, just because common area expenses are painstakingly listed as part of what a tenant must pay to its landlord doesn’t mean the landlord has to do any of those things.

It’s not just landlords who are forgetful (even though they are reminded about the omissions, negotiation after negotiation). Tenants also forget a lot of things that go into real, executable leases. Our tongue is so far buried in our cheek already, that we fear swallowing it if we were to make a tenant-side list today. We might do so during a slow news week or a holiday week, but not today.

A fair question is: does it matter? Why would a single blog positing buried somewhere in the immense World Wide Web triggers a landlord’s memory and get these provision put into its form lease? After all, many of these items come up every time a lease is negotiated because the tenant will revise the draft lease to include them.

We suggest the following. These items are going to be added to any decent, important lease. Why not pay once to have them included in the lease instead of paying, each and every time a lease is negotiated? And, deny it as people may, the person whose lease form is used controls the outcome. When a provision is not in the form lease and everyone knows that it will wind up there before execution, why should the landlord (who invested) in a lease form in the first place, cede control over the “missing” provisions to the tenant. After all, if the lease is missing something that’s going to be in there at the end of the day, the tenant will supply the initial draft and thereby control the negotiation.

So, landlords, be elephants – don’t forget to include inevitable provisions in your lease forms. Save money and get versions of these lease provisions more favorable to you by facing reality and by starting with a complete lease form.

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Comments

  1. Why do landlord-form leases forget to include…?

    Maybe those landlords are lazy. Or they’re ignorant. Or they’re cheap and won’t spend money on an attorney. But in some cases, they are smartly establishing for themselves maximum power and leverage and flexibility and profitability and deniability, while leaving it up to the tenant to fight for his/her own protections – hoping that those all-important tenant protection (or neutral) concepts will be missed by the tenant or his attorney. And THAT does happen all the time!

    Smart landlords secure those advantages cited above by being very specific about the landlord’s rights and the tenant’s obligations and very vague about the tenant’s rights and the landlord’s obligations. And many (most?) small, inexperienced tenants don’t know how important the lease is and they take it very casually. Many never engage an attorney with the applicable commercial lease negotiation skill set to protect themselves. Instead, they either sign the lease without understanding it and making necessary changes or they pick a few concepts they’ve heard about and address those while leaving the bulk of the document untouched.

    Ignorance abounds!

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