Commonly Overlooked Terms to Ask for When Renegotiating a Commercial Lease in This Climate

BY: NEIL RUBIN

While office vacancy rates remain relatively high, landlords are continuing to provide incentives to both retain existing tenants and attract new tenants to their locations. These incentives usually cover a combination of free rent and improvement allowances. Usually these items, as most business terms, are negotiated up front when a term sheet or letter of intent are being prepared.

While the monetary incentives may be the initial reason why tenants chose a particular location, there are numerous other provisions to keep in mind in terms of completing the lease process.

Tenants looking to execute new leases should be mindful of certain provisions in the lease which will benefit them long past the execution of the lease and for years down the road.

As an example, a non-disturbance clause will provide confirmation that in the event a landlord defaults under a loan obligation, the foreclosing lender will not terminate the tenant’s lease. For a variety of factors, landlords have generally been reluctant to obtain NDA’s from their lenders. Currently, landlords appear to be more willing to use some reasonable efforts to obtain them both from current lenders and future lenders for the benefit of the tenants.

Another area where landlords have shown willingness is the release of any lien rights to tenant’s personal property in the premises. This can be critical for if a tenant defaults, as most leases provide for the landlord to have a lien against such property and the right to seize it to pay off any past due rent or other charges. Recently, we have been more successful in having landlords waive these rights which means that even if a tenant were in default, they would be able to keep and remove their property which obviously can make any set up in a new location much more efficient and not as costly.

There are many provisions similar to these examples where some advance planning can be well worth it when a problem may arise numerous years into a multi-year lease, which issues aren’t even on the radar at the time of the lease signing.

Neil Rubin is a Pennsylvania and New Jersey based real estate attorney. He represents developers, condominium associations, landlords, tenants, buyers, sellers, and leasing agencies. Neil can be reached at
nrubin@offitkurman.com.