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Get the Right Help in Lease Matters

I’ve spent the better part of 18 months and 34 newspaper columns now talking about some of the myriad issues that office space tenants and their representatives have to deal with in today’s highly complex, dynamic — and litigious — commercial-industrial real estate market.

Trying to cover all the potential problems, however, is somewhat akin to painting the Golden Gate Bridge; the task can never be completed.

Without fear of causing undue alarm, I’ve pointed out the more outrageous conditions and stipulations landlords and property managers have foisted upon unsuspecting and naive tenants. Many of these tennants assume they’re being treated fairly because the landlord’s leasing representative tells them so or they mistakenly assume they have no choice but to sign a lease agreement where the “Sign-here-and-date” stickies indicate.

Being treated “fairly” is a notion open to considerable negotiations and differences of opinion, depending on who you are in a leasing transaction. However, the problem isn’t always sitting on the other side of the negotiating table. In all honesty, the “enemy” often is ignorance on the part of tenants who have little idea about how much is involved or what’s at stake in leasing office space. In too many cases, the often-onerous terms and conditions in most signed office leases today are not the fault of the landlord, property manager or even the landlord’s broker.

I’m continually surprised and saddened when I hear of repeated instances in which tenants either sign lease agreements without so much as reading them, thinking the 50 pages of such documents contains “boilerplate” language found in every lease. Nothing could be further from the truth.

Still disturbing is the practice of some tenants to turn the matter over to their company’s law firm where some business attorney, fresh off a buy-sell agreement or insurance squabble, looks the lease document over and provides input that is totally worthless in protecting the tenant’s best interests. I’ve even heard of instances in which a prospective tenant submitted the lease he was asked to sign to the attorney who handled his wife’s estate or a neighbor’s messy divorce. At one recent function, an acquaintance and tenant client of another firm suggested, after a couple of Margueritas, that a student at the end of the first year of law school knows as much contract and property law as any practicing attorney.

Good grief! Is it any wonder that great numbers of office tenants are being skewered by their own actions and inactions?

Let me be very clear: Leasing office space is not a “warm and fuzzy” experience for tenants. Lease agreements are not “win-win” documents in their intent and focus. Every word in these agreements is intended to protect the interests of landlords and property managers. Period.

Real estate leases as such are complicated matters requiring attorneys who not only specialize in real estate law but who devote a significant percentage of their practice to leases. A real estate attorney who does loan-related work, for example, wouldn’t have cause to know the more specialized issues such as operating expenses, the base-year impacts on such expenses, “gross ups,” insurance-related issues, assignment and subletting recapture and profits, and construction issues such as charge backs — to list but a few items.

There are many other questions and issues that need to be analyzed by someone who knows what he or she is doing in leasehold law. For example: What if the building, for some reason, becomes inhabitable due to earthquake, fire or some other major disaster? Does the tenant still have to pay rent even though the space is destroyed and not fit for occupancy? Believe it or not, many lease agreements contain such a provision.

If there is such damage, how long does the landlord have to fix the space so that it can be occupied once again? Some leases are a little fuzzy and lenient in terms of requiring the landlord to perform repairs and restoration work in a timely manner. In such situations, the building owner is being paid by both the insurance carrier and tenants. I would worry about how to instill enough incentive into the landlord to respond to the need of his tenants.

How are operating expenses for the building handled? What about the soaring cost of utilities? Who pays what and how much? Most office leases stipulate that tenants pay utilities.

Ditto for the increases in property taxes resulting from the office building being reassessed at a higher market value. In most cases, office tenants collectively pay the landlord’s property taxes — even the hefty increases common in recent years.

What about lease arbitration provisions and whether there are options to renew or expand? If so, what are those options? What are the tenant’s legal remedies?

Dunno? Too bad.

Competent tenant-leasing representatives specializing in office leaseholds often can help tenants negotiate some of these leasing provisions. In these situations, as well those conditions that are not negotiable, the use of a real estate attorney specializing in office leaseholds can help the client understand exactly what their exposure is and what their legal remedies might be.

Tenants have no more business hiring an attorney who doesn’t specialize in leases to represent them than they do hiring Ally McBeal to do the job. Especially when there are an abundance of excellent attorneys available to counsel tenants. I would be happy to provide a list of such lawyers to anyone would like it. Just e-mail me.

Jason Hughes is founder of Hughes Marino, an award-winning commercial real estate company with offices across the nation. A pioneer in the field of tenant representation, Jason has exclusively represented tenants and buyers for more than 30 years. Contact Jason at 1-844-662-6635 or jason@hughesmarino.com to learn more.



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