The Perfect Commercial Lease

Whether a commercial lease is perfect depends on who is asking the question and who drafted the lease. Most are drafted by or on behalf of the landlord/lessor and are tilted strongly in its favor. Occasionally a proposed lease is drafted by or on behalf of the tenant/lesse and is tilted in its favor. Parties considering entering into a proposed lease often consider most of it "just boilerplate," and they are correct. But do not assume the boilerplate is insignificant. It can contain:

* a relocation provision which gives the landlord/lessor the right upon certain conditions favorable to it to move the tenant/lessee to another location within a building or development. It is often said that the three most important things about a new space for its business are "location, location and location." This is particularly true for retail businesses where the tenant/lessee must live with the uncertainty of whether the clause will be invoked. After you search for and secure a good location you are not likely to want the landlord/lessor to have the right to change it. Such a right also makes it harder to sell or transfer that location to another as it is likely to be considered a risky transaction;

* a demolition provision which gives the lanlord/lessor the right to demolish the building or development in which your space is located and terminate your lease. This can appear in leases for older structures, buildings in an area that is being redeveloped, or when the landlord/lessor thinks that the existing structure is not the highest and best use of its property. This poses the same problems as a relocation clause because it can result in the loss of your good location and the related uncertainty will almost certainly result in substantial difficulty if not the impossibility of finding a buyer or transferee.

* a termination on proposed transfer provision which would give the landlord/lessor the right to terminate your lease if you ask, as its lease requires, for its permission to assign the lease to another. This can destroy your chance of making any money as a result of the desired transfer which might involve the purchase of your business or location. When you have a deal made with a another your landlord will know all about it from your request, can terminate your lease and make a deal directly with your landlord/lessor thus cutting you out of the transaction.

But this post was supposed to be the perfect lease. You have a much better chance of getting a greatly improved one if you have an experienced lawyer or broker review it before you sign it, propose changes and then help negotiate them with the landlord/lessor. Based on my experience you have a very good chance of getting a high proportion of those changes made. In the situations discussed above if I represented the tenant/lessee I would propose deleting all of those provisions.

By the way, long distance running is my favorite exercise and passtime. I've run 25 marathons and over a dozen half marathons. My next marathon is in Phoenix January 18, 2009.