Office Leasing 101

While many landlords have a form lease, the terms may vary depending on the needs of each particular property and tenant.  The following list reviews some of the basic terms of a typical office lease and identifies some issues that the parties should address in the lease agreement in order to formalize the understanding between the parties.

1.  Parties, Term.

The basic terms of a lease cannot be overlooked.  Who are the parties?  If the tenant is a business, is a personal guaranty required?  How long is the lease?  When does it commence?  When does the rent commence?  These basic issues are typically addressed in the first few paragraphs of the lease.

2.  Rent.

The lease should specify what is included in the rent.  A “net” lease may contain additional charges for utilities, common area maintenance, real estate taxes and insurance.  The lease should also address whether the rent will increase for extension terms and whether the rent will increase if the tenant holds over beyond the expiration of the term.

3.  Description of Premises, Use.

The lease should clearly describe the areas of the building are included within the demised premises and ideally attach a floor plan as an exhibit.  The permitted use of the premises should be included.  If such uses are inconsistent with the certificate of occupancy or local zoning, the lease should address this issue.

4.  Assignment and Subletting.

The lease should address under what circumstances the tenant may assign or sublet the premises.  The landlord’s consent is typically required.

5.  SNDA.

Tenants may consider requesting a subordination and non-disturbance agreement from the landlord’s mortgagee, if any.  This agreement will ensure that if the tenant is not in default, the tenant may remain in possession even if the lender forecloses on the property.

6.  Default.

The lease should specify what constitutes an event of default, how long the parties have to cure a default, and consequences for not doing so.

7.  Signage.

In the event that the tenant requires signage, the installation, maintenance, permitting and removal of the signage should all be addressed in the lease.

8.  Parking.

For some tenants parking is crucial to their business plan.  The lease should address any reserved parking, valet charges, snow and ice removal, maintenance, permitting, etc.  Also note that if the parking is located on a separate lot, it may be advisable for the tenant to conduct some basic due diligence to find own who owns the lot and understand the terms of landlord’s use.

9.  Landlord’s Work/Tenant’s Work.

If the Landlord or Tenant will be performing work to make the premises suitable for the tenant’s use, such work should be clearly described in the lease.  If any government entitlements e.g. zoning permits are required, the responsibility and cost therefore should be clearly allocated.

10.  Utilities.

The lease should specify whether utilities are sub-metered or direct metered.  If the tenant has special HVAC or utility needs.  For example, a fitness club may require a dedicated HVAC unit with a specified capacity.  A wireless telecommunications carrier with rooftop antennas may need access to the building’s mechanical systems, conduits and shafts in order to complete its installation.  These considerations should all be set forth in the lease and where appropriate, depicted on lease exhibits.

This list is by no means intended to be exhaustive.  These are just a handful of issues that should be addressed.  If properly drafted, a lease agreement should provide the landlord and tenant with a clear understanding of their rights and obligations under the lease.  This reduces the likelihood of a future dispute.  As with most documents, forms are helpful to use as a starting point but form should be tailored to meet the needs of the parties and premises involved.

To learn more commercial leasing, or to obtain more information about our office, please visit our website or contact us at (914)338-8050.

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