Standard Lease Agreement - Devils in the DetailsStandard Lease Agreement The Devils in the Details! A commercial real estate lease is about 50 pages of legal document (by the way, there is NO standard lease). This is a fallacy perpertuated by Landlords and their agents. Every commercial real estate lease is negotiable and you should negotiate it! Toronto office leasing leases have were written by landlord’s lawyers and are heavily weighted towards the landlord's favour. Many tenants are primarily concerned with the location of the building, its amenities, etc. and of course with the rental rate. Many don’t even realize they can negotiate the lease and don’t know how to do so and just sign the lease without even consulting a lawyer. A really staggering statistic is that industry estimates are that about 90% of small tenants make no changes at all to a lease! Don't make this mistake! Even Toronto Commercial Real Estate Tenants who know that changes are necessary make negotiating mistakes that leave their own lawyers little room to change any lease clauses at all. Yet clauses inserted in leases by the landlord’s lawyers can end up costing tenants tens of thousands of dollars over the term of the lease. They can also cost many thousands, in penalties upon lease expiry. Simple changes to offer renewal proposal language or proposals for new leases can provide your lawyer with the latitude to make changes that will protect you. Better still is to have a strong offer to lease document prepared for your business. Harvey Haber, Toronto lawyer and lease expert and author of The Commercial Lease, A Practical Guide, says "the offer to lease is more important than the lease itself". This is because this is when "the Landlord is willing to make concessions to the Tenant to make the deal." Ensure that you have an offer to lease where the wording and terms and conditions work for you. Don't use the landlord's agent's offer to lease or you'll be in trouble. Guaranteed! A so called standard lease agreement contains hidden cost clauses that can cost you a lot of money and problems in the future. It can even affect the viability of your business to survive in some cases. A highly skilled real estate consultant will spot these hidden and negotiate them out of a lease. agreement. He will negotiate caps on operating costs, such as property taxes, building repairs or insurance premiums and building operating costs. He will not allow your landlord to terminate the lease for his benefit or relocate your premises in order to lease space to a larger tenant. He will provide for you to sublet your space, terminate your lease if the building is destroyed and eliminate reduce or modify personal guarantees or security deposits. And depending on how much negotiating clout you have he can do much more for you.
Some things to watch out for: bail-out and co-tenancy clauses for retail tenants (tip: negotiate these and get them), rentable and usable space, leasehold allowances, lease termination, and other hidden costs.
The real crime is that most standard lease agreement are not even touched by small business and professional tenants. It is amazing how often tenants find themselves looking for legal advice because of problems as a result of poorly negotiated or non-negotiated lease terms. So don't sign a landlord's "Standard Form Commercial Lease" without making changes. Not only are there things to take out of a lease, there are also things to put into it. Signing a standard lease agreement without professional input can cost you big time! Got a question?
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