Legal Counsel May Prove Invaluable as Your Contemplate Your Next Commercial Lease

October 31, 2013

The publication Inside Tucson Business recently published an article entitled “Don’t sign a commercial lease until your lawyer says OK.” This article is noteworthy for two reasons: (1) the recommendation in the title is good business advice that is equally applicable in New York and New Jersey as it is in Arizona, and (2) it correctly notes several of the potential pitfalls that may await the unwary commercial tenant that an experienced attorney may help you avoid or mitigate.

Retaining an attorney to review your lease is wise because the selection of location for your business represents a significant investment, even if your business does not require a huge space. As an example, a 10-year lease at $8,500 per month means a $1.02 million investment across the life of the agreement. With such a substantial sum of money on the line, investing in legal advice to ensure you have a workable agreement in the interests of your business makes considerable sense.

Your attorney can help spot potential risks and pitfalls in the lease agreement that could potentially harm your business, and recommend possible terms that may strengthen your position in the lease. For example, your landlord may have provisions in the agreement that restrict how you use the space. Also, if the property you are considering is located in a mall or shopping center, a lease agreement may give the landlord the right to move your business to a different space in the facility. The agreement may give the landlord the right to pick any location within the property (which could be a harmful one for your business,) and may place some or all of the costs of that relocation on your business.

Furthermore, the landlord probably has a term requiring your business to pay a portion of the cost of maintaining common areas and another clause requiring the individual owners or officers of your business to sign a personal guarantee in the event of a breach. The landlord’s proposed lease could also seek to give the landlord the right to terminate the lease if you attempt to assign your lease or sublease your space.

On the other hand, there are certain terms you may seek to include. You may wish to include an exclusivity provision, which prevents your landlord from renting other spaces in the facility to another entity engaging in your same or a similar business. These terms can provide significant added benefit as they would prevent your landlord from leasing a space, perhaps just a few doors down from you, to one of your direct competitors.

With some terms, you may need to push for a provision’s exclusion or inclusion; with others, you may simply negotiate exactly what the term says. In each scenario, your attorney can provide you with useful advice, both in the process of negotiating what terms go in (and stay out) of your lease, and in ensuring that the exact language used in those terms does not contain any traps that could harm or destroy your business. To obtain careful, thoughtful and knowledgeable advice and representation as you make this essential decision for your business’s future, consult the New Jersey real estate attorneys at Samuel C. Berger, P.C. Our attorneys are extremely skilled and have the experience to help you to reach an agreement that makes sense for your business. Reach us online or call (201) 587-1500 or (212) 380-8117.

Blog Posts:

Person Assuming Management of Family Business Does Not Assume Liability for Predecessor’s Business Torts, According to New York Court, New York & New Jersey Business Lawyer Blog, Sept. 26, 2013
Four Factors to Consider When Negotiating a Commercial Real Estate Lease, New York & New Jersey Business Lawyer Blog, Aug. 14, 2013
State Department Issues P-1 Athlete Visas to Competitive Video Game Players, New York & New Jersey Immigration Lawyer Blog, July 23, 2013