Top Ten Most Important Things to Consider When Reviewing a Commercial Lease For a Professional Services Firm

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November 21, 2014

1.         The Work Letter and the Commencement Date: who builds; allowances; payment schedule; takeover rights for non-performance; how to measure commencement date; interrelationship with substantial completion definition.

2.         Exit Strategies: assignment and subletting rights; addressing growth and shrinkage; lease buyout negotiations.

3.         Expansion Rights: options; RFRs; RFOs; must-take.

4.         Operating Expenses: base year; inclusions and exclusions; audit rights.

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5.         Insurance: relationship to indemnity and damage-and-destruction provisions; liability versus property coverage; business interruption and loss of earnings; self-insurance.

6.         Services and Utilities: protection of Tenant vis-à-vis other tenants of Building; focus on sufficient power and meeting Tenant’s special utility requirements.

7.         Tenant Repairs: protect right of self-help where Landlord is or may be “offshore” or otherwise not able to respond immediately with local representation.

8.         Premises: focus on issues of measurement, relocation, visibility, access, signage and other personal rights.

9.         Security Deposit: negotiate to minimize amount of funds tied up as security; understand and negotiate issues of guaranties and letters of credit.

10.       Surrender of Premises; Removal of Property: coordination with alterations provision; holdover issues and rates; eliminate surprises.

- Special issues relating to retail tenants: use; radius restrictions; co-tenancy; operating covenants; go-dark rights; parking; exclusive parking spaces; preferred areas; sightlines; modifications; reciprocal easements

- Special issue for Tenant’s attorney: subordination, non-disturbance and attornment agreement

This article is from a manual originally prepared for our seminar Basic Commercial Leases in California.  To learn more about Lorman Education services, visit www.lorman.com.

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About the author:
Richard C. Mallory Partner resident in the San Francisco and Los Angeles offices of Allen Matkins Leck Gamble Mallory & Natsis LLP. Practice emphasizes all aspects of office, industrial and retail leases. Frequent local and national speaker and has written articles on the subject of commercial leasing. Listed as a leading lawyer in California real estate in Chambers & Partners USA, 1999 to 2014. Listed as a Top 100 Northern California attorneys, 2006 and 2009 to 2013. Listed in The Best Lawyers in America in the field of real estate law, 1989 to 2014. Member, advisory board, Georgetown Law Center's Advanced Commercial Leasing Institute. Fellow, American College of Real Estate Lawyers. Member, Stanford Real Estate Council.

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