How an Integration Clause in Your Commercial Can Work For, And Against, You

July 1, 2014

Many contracts, including commercial lease agreements, contain what’s known as an integration, or merger, clause. While these clauses may seem like boilerplate language and not worthy of close consideration, it is important that you understand what an integration clause can mean for you should you encounter problems with your commercial landlord or tenant.

An integration clause states that the terms included in your lease comprise the entire embodiment of your agreement. This means that any prior negotiations or verbal agreements are not relevant to any contractual dispute you and your landlord or tenant might encounter that goes to court. Integration clauses may be very useful in New Jersey commercial leases because New Jersey Supreme Court precedent has long taken a very broad view on extrinsic evidence, stating that such proof is instructive toward aiding in the interpretation of an agreement and, therefore, often admissible.

You should review and consider carefully the integration clause in your lease. That clause states that whatever is in your lease agreement represents what you and your landlord or tenant agreed to, and everything you agreed to. If, for example, you and your landlord put down in a separate written document what repairs the landlord will perform, it may benefit you to refer to those documents specifically in the integration clause, and make sure that those repair agreement provisions are properly included within the lease’s terms.

Additionally, making sure that all of each party’s assumptions and expectations are reduced to writing and included in the lease document is another good idea. What’s more, stating a purpose for renting a space is not always enough. The tenant should also make sure that all of the requirements of that business also appear in the lease. A recent case, while not from New Jersey, is illustrative of this point. A tenant, Midwest Hospitality LLC, leased a space in Wisconsin for the purpose of running a Church’s Chicken restaurant. Part of the business model of most Church’s locations involves operating a drive-up window, which remains open until very late at night. However, the local permitting authorities only approved Midwest’s permit upon the condition that its drive-up window close at 9:00 p.m. Midwest terminated the lease.

When the parties litigated the dispute, the outcome favored the landlord. The lease agreement had an integration clause, and the lease stated only that Midwest intended to run a Church’s location. That reference alone was not enough to indicate that the parties agreed about the late-night drive-up window. In other words, if the operation of the late-night drive-up window was essential to the tenant’s needs, that provision should have been in the lease specifically rather than simply a reference to operating a Church’s restaurant location.

When it comes to your commercial lease, no clause is too small or too boilerplate to warrant close attention. You likely spent considerable time and effort negotiating your agreement, so you should ensure that the document establishing that agreement accurately reflects everything in it. For knowledgeable, skillful advice and representation about drafting your lease agreement, consult the real estate attorneys at Samuel C. Berger, P.C. Our New Jersey real estate attorneys have the experience and ability to ensure that the document you sign properly protects your business. Reach us online or call (201) 587-1500 or (212) 380-8117.

Contact us through our website or call to schedule your free, confidential initial consultation today.

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