July 2006
Volume 2, Number 4
Table of Contents

Checklist for Commercial Leases

Twofold Agreement
Grant of Interest in Real Property
Contract between Landlord and Tenant

Lease Provisions

  1. Parties
  2. Identify Premises
  3. Use
  4. Term
  5. Options
  6. Rent
  7. Obligations of Landlord
  8. Obligation of Tenant
  9. Assignment - Sublet
  10. Insurance - Condemnation
  11. Defaults and Remedies
  12. Subordination
  13. Estoppel Certificates
  14. Miscellaneous

Parties
Type of Entity of Party
State of Qualification
Names - Addresses

Demised Premises

Land and Building
Give Mailing Address
Use Legal Description
Include Required Easement Rights

Retail Stores - In Shopping Center
Set Out Easements
Specify Square Footage
Identify Common Areas
Identify Store Location by Number & Location

Retail Stores - In building
Attach Drawing
Customer Parking
Appurtenant Rights
Identify Store Location
Specify Square Footage
Directory Board in Lobby
Entrance to Lobby
Signs

Office Space
Parking
Directory Board
Square Footage
Attach Drawing
Window Treatment
Appurtenant Rights
HVAC – Hours of Operation
Room Number and Floor
Restrictions As to Signage
When Is Access Permitted?
Front and rear Entrances

Apartment unit
Parking
Security
Restrictions
Attach Drawing
Windows Treatment
Suite Number and Floor

Combination office and warehouse
Access
Loading Docks
Personal Property
Square Footage of Each Area
Floor Weight Per Square Foot
Drive around building for Heavy Trucks

Use

A. Retail space
Restrict to One Use
Operating Agreement - Continuous Occupancy

B. Office space
Restrict Use, Noise, Traffic to Office

C. Apartment space
Limit to One Family
Restriction As to Noise
Are Pets Permitted?
Parking
Storage Area
No Other Use
No Illegal Purpose
Building Regulations

Tenant Considerations

Zoning - use restrictions
Adequate utilities
Right to use parking area
Does rent commence before occupancy?
Time for Making Tenant Improvements
Allowance for tenant improvements
Environmental matters
Expansion rights


Retail Space
Clear span with no columns
Delivery area for trucks
Hours of operation
Base year for taxes
(Dorothy Stein Shops, Inc. Case, 59 Misc. 2d 122)
Restrictions on signs - name on Pylon sign

Term of Lease

  1. Interim Term
  2. Fixed Term
  3. Be Specific As to:

a. Termination Date
b. Commencement Date
c. Basis for Determining Dates

  1. Statute of Frauds
  2. Must Tenant Take Possession Before Commencement
  3. Renewals

Options

To Renew or Extend Lease
Except Exercised Options
Agreement to Agree - Not Enforceable
Ample Notice of Tenant=s Exercise of Option
Definite As to Term and Amount
(Or Specific Formula to Determine Amount)

Option to Lease Additional Space
Designate Space
Time Option May Be Exercised

a. Definite Time
b. When Space Vacant
c. Rent Per Square Foot

File Memo, Re: Option

Option to Terminate
By Landlord if No Percentage Rent Paid
By Tenant:

a. After Certain Period
b. If Anchor Tenant Vacates

To Purchase Landlord's Fee Interest
Notice Required
Specific Purchase Price
Set Forth Terms of Contract
Time to Exercise

Right of First Refusal
Landlord Can’t Sell for Less, or 5% or 10% Less, Than Offer
Period to Decide
All Terms Must Be Set Forth

Right To Match Offer
Offer Must Be Furnished in Writing
Period to Decide
Difficult for Landlord to Sell

Rent
Fixed Rent
Interim Rent
Additional Rent
Percentage Rent

Interim Rent
Contributions toward Taxes, Insurance
Payment of Utilities
Payments for CAM
Nominal Amount

Fixed Rent
Methods to Determine Increases:
Appraisal
Step-up Rents
Indexed Rents

Percentage Rent

Based on:
a. Gross Sales
b. Net Profits (Not Gross Income)
c. Type of Business

Need Floor Amount
a. Natural (Rent Capitalized)
b. Negotiated

Define Terms
a. Sales
b. Gross Sales
c. Net Revenues

Requirements
Conduct Business in Full Space
Store Adequately Stocked
Hours Open for Business
Maximize Gross Sales
Monthly Report of Sales

Payment Dates
Monthly
Monthly after Floor Attained
Quarterly
Annually
Annual Adjustment

Recapture Space
If False Statements Received
If % Rent Not Paid for Set Time

Right to Audit Records
Must Prior Notice Be Given
Period Records Must Be Kept
Who Pays for Audit
Rights after Audit

Non-Competition
Radius Restriction
Negation of Partnership

Abatements and Offsets
Initial Rent Concessions - Inducement Credits
Self-Help - Repairs (Landlord’s Obligation)
Lenders Disapprove of Full Offset
Leasehold Improvement Costs Offset
Takeover of Tenant’s Former Lease
Interruption of Landlord’s Services
Fire - Condemnation
Landlord’s Default

Landlords's Obligations

Free Standing structure
Structural repairs but exclude

a. doors
b. docks
c. skylights
d. windows

Multi-tenant building
Structural repairs
Painting after certain period
Electrical, plumbing and HVAC systems

Obligations of Tenants
Maintain Leased Premises
Compliance with Laws
Repairs

a. Non-Structural Repairs
b. If Landlord Fails, May Tenant Do Them?
c. If Landlord Makes Repairs, Tenant Billed Comply with Building Regulations
d. Traffic
e. Signage
f. Window Treatment
g. Hours of Operation

Assignment
If Silent, Tenant May Assign
Consent to Assignment by Landlord

a. Not to Be Unreasonably Withheld
b. In Landlord’s Sole Discretion

Recapture Premises If Assigned
Original Tenant Remains Liable
Right to Terminate if Assigned by Operation of Law
Right to Assign to Parent, Subsidiary or Affiliates

Subletting
Consent of Landlord
All or Part of Premises
Right to Terminate Lease
Right to Get Portion of Increased Rent from Subtenant
Right of Landlord to Get Rent From Subtenant
Require Subtenant to Attorn to Landlord (Attornment by Subtenant - Not Landlord’s Consent)

Insurance
Who Maintains Insurance?
Interest Protected
Coverages Required

a. Flood
b. Boiler
c. Dramshop
d. Plate Glass
e. Public Liability
f. Fire and Other Hazards
g. Rent or Business Interruption

Use of Proceeds
Waiver of Subrogation
Mortgagee as Loss Payee

Damage and Destruction
May lease be terminated?
Who has obligation to restore?
Will insurance proceeds be available for work?
Who will hold proceeds during construction?
Right to approve plans and specifications.

Condemnation
Termination of Lease

a. Total Taking
b. Partial Taking
c. Temporary Taking

Rent Adjustment - What Basis?
Entitlement to Award for Taking
Tenant Has Separate Action for:

a. Loss of Business
b. Moving Expenses
c. Relocation Allowance

Obligation to Restore Remaining Premises
Who Gets Award for Tenant Improvements?

Defaults - Remedies
Limit Notices for Re-Occurring Defaults
Right to Notice and Cure
Right to Terminate for Defaults

a. Monetary Defaults
b. Non-Monetary

Remedies - Exclusive or Cumulative
Remedies:

a. Reentry of Leased Premises
b. Dispossess Tenant
c. Terminate Lease
d. Collect Rent to End of Term
e. Damages

Landlord Wants to Collect for:

a. Cost of Redecorating
b. Cost of Reletting
c. Tenant’s Share of Taxes, CAM
d. Attorney’s Fees
e. Lost Rents - Fixed and Percentage

Tenant Wants:

a. Release From Lease
b. Limit Rents Which May Be Collected
c. Landlord to Mitigate Damages
d. Provisions for Landlord=s Defaults

Subordination
To Mortgages

a. Should Be Subordinate to All Existing and Future Loans
b. Could Require Non-Disturbance and Attornment Agmt.
c. Subordination Should Cover Modifications, and Renewals

To Reciprocal Easement Agreements

a. Include Modifications and Extensions

To Development and Operating Agreements
Quiet Enjoyment Clauses

a. Subject to Subordination

Cut-off States

a. Mortgagee Has Right to Have Mortgage Subordinate to Lease

Lease Ahead of Mortgage

a . Except Insurance Provisions

Estoppel Certificates

From Tenant

a. For Mortgagee
b. For Potential Purchaser
c. Each Lease Year for Update on Status

From Landlord

a. For Assignment
b. Leasehold Financing
c. Each Lease Year for Update on Status

Limit Number of Estoppels Per Year

Miscellaneous
Notices
Signs and Advertising
Surrender of Premises
Holding Over
Partial Invalidity
Descriptive Headings
Binding Effect
Memorandum of Lease
Integrated Agreement
Choice of Law
Waiver
Counterpart Signatures
Litigation Expenses
Pronouns

Did you find this checklist helpful?  Do you think more information like this would help you?  More information is available - This checklist was republished with permission from the GP/Solo Publication: Commercial Real Estate Law Practice Manual; pp327-331, by James P. McAndrews  GP/Solo members can purchase this book, which includes electronic forms, at a discount through the GP/Solo bookstore website: http://www.abanet.org/genpractice/books/index.html .

 

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