Commercial Tenancies - A Minefield for Tenants

Many businesses lease the space in which they operate.  Some have written leases, some do not.  Here are some pointers if you are planning to enter a non-residential lease:

Some landlords present you with a short “Offer to Lease” that contains the basic terms.  Those documents typically contain a term like this: “The Tenant agrees to execute the Landlord’s standard form of lease.”  You can be sure that the Lease is a lengthy document.  Why would you sign something (the Offer) in which you agree to sign a document that you have not seen (the actual lease)?  I recommend that potential tenants ask to see the actual lease and not commit to anything until they have thoroughly reviewed that document.  (Unfortunately, you will probably need to pay a lawyer to help you understand the lease document.)

Read ALL of the lease and make sure that you understand everything and are prepared to be bound by the terms.  I have seen too many people that come to me complaining about a term of the lease being “unfair”, expecting me to tell them that I can get them relief from the term.  I don’t think so!  If you can’t agree with the terms, don’t sign.

Sometimes, during the term of the lease, the landlord owes the tenant some money, often for adjustments to additional rent for common area charges.  Sometimes, a tenant gets upset that a landlord is not complying with their obligations (e.g. failing to repair common areas).  There is usually a term that provides that you cannot set off any amounts owed by the landlord against rent. 

DO NOT withhold rent in these circumstances.  If you do, the landlord can terminate the lease and change the locks, without notice to you.  That may happen at very inopportune times.  I assisted a landlord in changing the locks on a mortgage broker on the last Friday of the month.  We did the same thing to a real estate lawyer.  Inconvenient, yes.  Did it get the attention of the non-paying tenant?  Absolutely!

If you have a dispute with the landlord about terms of the lease, check the lease to see if there is a dispute resolution mechanism or if the lease requires arbitration.  You are not likely allowed to arbitrarily withhold rent.  You will have to start the process to get a ruling on how much, if any, of an abatement of rent you will get.

If your lease contains a renewal provision, read it carefully.  Most leases require the tenant to give six months notice of their intention to renew.  Doing nothing may result in the landlord refusing to renew. 

Finally, read the lease carefully to see what happens to the leasehold improvements that you make.  It is an error to assume that you can remove the things that you installed.  I have seen leases that provide that any improvements made or fixtures installed are the property of the landlord.