It’s never safe for a tenant to assume all of the terms it has negotiated while trading Letters of Intent (LOI) or Proposals/Counterproposals with a landlord listing agent is the end of the negotiation of a commercial real estate lease agreement. It’s expected that lease language will be negotiated once the landlord delivers the draft lease contract, however, it’s not uncommon for the landlord to work to improve the deal they seemingly agreed to with the Letter of Intent or accepted proposal. Tenants must work to make sure the deal they think they agreed to gets completely articulated within the actual lease agreement. Remember, a deal is not a deal until Tenant and Landlord sign the lease contract.
First, it’s important that the terms defined in an office lease contract completely match those agreed to in an LOI or proposal to avoid any confusion between the parties involved. If there are discrepancies between what was originally agreed upon and the legally binding terms presented in the lease contract, it could be difficult for either party to enforce their rights under the contract. Although pitfalls of discrepancies may not be apparent at the onset of the lease term, they can often become issues later on in the term, often leading to disputes, costly litigation, and ultimately putting a tenant’s occupancy in a property at risk. To ensure that all parties have a full understanding of their rights and obligations under the agreement, it is essential that both documents are consistent with each other. As such, when negotiating an office lease agreement, it is vital to ensure that all relevant details from the original proposal or letter of intent are included in the final contract. Doing so will minimize the chances of any misunderstandings or disagreements further down the line, and help to ensure that all parties are satisfied with their agreement.
Next, a tenant must be as diligent in the negotiation of a lease contract as they were in negotiating the term of the lease in the LOI or Proposal. Landlords will sometimes try to improve their position on business terms or gain back some of what they lost in the negotiation of an LOI during the negotiation of the lease contract. As a tenant, you’re not done negotiating until that lease contract gets signed. As mentioned earlier, a deal is not a deal until the lease gets signed by both parties. Don’t give up in the 12th hour of negotiation.
It is also important to understand what rights and obligations each party has under the agreement. This includes who is responsible for paying rent and when it’s due, utilities, and other costs associated with running a business from a leased space; ensuring both parties are aware of any rules or regulations laid out by the landlord; understanding when the tenant needs to provide notice if they wish to vacate their premises; and confirming which party holds responsibility for maintaining upkeep on the property. By taking the time to understand all of the terms outlined in an office lease, both parties can rest assured that they will be legally protected should any issues arise during the tenancy period. We always suggest to tenants, they outline their obligations under a lease so they can easily refer to the outline anytime during the lease term when needing to pull out details of the lease agreement. As a firm that exclusively represents tenants, CARMEN Commercial Real Estate Services ALWAYS provides client tenants with an easy to understand abstract of the lease document, so they never have to dig through countless pages of legal jargon to uncover details of an agreement they executed years earlier.
Further, we provide online support where our clients can log in to see all of their firms’ lease information and critical lease dates. I can’t tell you how often tenants fight tooth and nail for business terms in a lease negotiation and then completely forget those points or let critical lease dates lapse, such as renewal options notice dates. Doing so can be very costly to a business and even threaten a business’ health and welfare.
In conclusion, it is essential to make sure that the terms defined in an office lease contract match those agreed upon in a lease proposal or Letter of Intent. This helps to ensure that the tenant fully understands their rights and obligations before signing the actual lease agreement and minimizes any potential confusion further down the line. It also provides legal protection for both sides should any disputes occur during the tenancy period. These steps will help ensure a successful and harmonious business relationship between landlord and tenant.
One last, but very important note: It is always advisable to seek professional advice when entering into an office lease. This goes both with advice from your legal counsel and your real estate professional. I would be remiss to not add, when negotiating an office or industrial warehouse lease, seeking the advice of a commercial real estate broker that represents landlords is a bit like asking your wife’s divorce attorney to advise you on the divorce. Be careful of brokers’ conflicts of interest when seeking a commercial real estate broker, which is why we always suggest seeking the services of a broker and brokerage firm that specifically represents tenants in their search for space and negotiation of leases.