By Harvey Haber
Office Lease Use Clause
Many office leases simply provide that the premises are to be used solely for “general office purposes”.
Is that a problem?
Absolutely.
The landlord may have given one office tenant a restrictive covenant for a particular use (such as an insurance office) and then discover that another office tenant is using its premises for the same use (as the other office premises may simply have in their lease that their office premises can be used for “general office purposes”).
What should a landlord do to avoid this?
A landlord should insert a specific use in each office lease.
For example, if it is an insurance office, the landlord should provide that the offices premises will be used only for the purpose of insurance administration.
In that way, the landlord can avoid a law suit by being specific as to what any other office premises are not to be used for.
Shell Company
A landlord should make the necessary searches to determine whether the tenant is financially viable or merely a “shell” company. If it is a “shell” company, without any assets, this will inevitably leave a problem to the landlord if the tenant subsequently defaults under the lease.
A tenant should make the necessary searches to determine whether the landlord is financially viable or merely a “shell” company. If it is a “shell” company, without any assets, this will inevitably leave a problem to the tenant if the landlord subsequently defaults under the lease, or under any mortgage on the property.
Always Ask
A tenant should always ask the landlord what the annual taxes and operating costs are (in addition, of course, to asking what the basic rent, and, if applicable, what the percentage rent is).
Why?
Because the tenant wants to determine its annual budget using relevant figures.
Harvey Haber, Q.C., J.D., LSM, DSA, C. MED., C. ARB., B.A. – He is senior partner at Goldman Sloan Nash & Haber LLP in Toronto. He specializes in Retail, Office & Industrial Leasing, Mediation and Arbitration and can be reached at haber@gsnh.com or by phone 416-597-3392.
Tags: commercial leasing tips
