It is not yet time to sign any Offer to Lease.
By Jean Louis Racine, Lawyer, Real Estate Broker – an excerpt from “Don’t Sign This Lease”
Did you show it to your tenant representative? Lawyers write those commercial leases for landlords! Seek their advice before signing this document. If you don’t have a lawyer or a tenant representative, show this Offer to Lease to your accountant. We both know your accountant is not the right professional to advise you on an Offer to Lease, but he knows many tenant representatives and lawyers who can advise you!
There may be some adjustments to add or some modifications to be spelled out more explicitly in order to avoid confusion in the future. As I will show you in next part, there is a special article to add to specify the exclusion of many operating costs.
Always assume that this landlord or leasing broker will be absent after you move in. He may change position or be hired by another landlord. You never know. You must assume this person won’t be there to confirm any of your negotiation items. Your tenant representative negotiates, writes, and corrects many leases a year. Some brokerage tenant representatives have an in-house counsel doing just that: protecting tenants before they sign an Offer to Lease and a lease.
Clearly Define Your Leasehold Improvement Needs
Can you add more gains for your benefit before signing this Offer to Lease? Let’s see how!
| WEEKS | SCHEDULE | NOTES |
| 1 | Define your requirements | |
| 2 | Define your space configuration | |
| 3 | Identify interesting buildings | |
| 4 | Write a search notice to landlords and leasing brokers | |
| 5 | Send your search notice to landlords and leasing brokers | |
| 6 | Schedule building visits | |
| 7 | Building visits: What buildings do you prefer? | |
| 8 | Ask landlords and leasing brokers of interesting buildings to send their first Offers to Lease | |
| 9 | Call other landlords to say: “Thank you, but we will call later.” | |
| 10 | Adjust and refine your requirements | |
| 11 | Meet each landlord to discuss his Offer to Lease | |
| 12 | Receive Modified Offers to Lease from those landlords and leasing brokers | |
| 13 | Complete your financial Excel sheets | |
| 14 | Meet the most interested landlords and leasing brokers to discuss their Offers to Lease | |
| 15 | Receive modified Offers to Lease from those landlords and leasing brokers | |
| 16 | Complete your financial Excel sheets | |
| 17 | Ask landlords and leasing brokers to draw a first plan (at their own expense) | |
| 18 | Confirm by email that each landlord and leasing broker will pay for the first plan. | |
| 19 | Receive and discuss the plan | |
| 20 | Request modification of the plan by the landlord’s architect | |
| 21 | Receive and discuss the plan | |
| 22 | Meet the short-listed landlords and leasing brokers to negotiate all allowances | |
| 23 | Wait for written confirmation of all allowances from the landlords and leasing brokers | |
| 24 | Negotiate for more | |
| 25 | Negotiate Offer to Lease | |
What Guaranty?
Landlords are spending a lot of money to induce you to sign a lease. Unless you are a solid corporation, landlords and leasing brokers will ask you to pledge some form of guaranty. Some landlords ask that you sign a suretyship. Others ask for a deposit, or a mix of a deposit and suretyship and money. There are no rules for a guaranty, so it is all open for discussion.
Let’s consider different forms of guaranties, and keep in mind this is just an overview of the most common guaranties that you can negotiate with landlords and leasing brokers. It is not the purpose of this book to explain all the details of these guaranties, so you should seek advice from your tenant representative or lawyer.
A suretyship is a contract by which you personally (or another corporation) bind yourself (or the corporation) to perform the obligation of the tenant (your company). This suretyship might be for the full or partial amount of the lease.
If the full amount of all your rent and expenses of your lease is $2,000,000.00, a full personal suretyship means you are personally responsible for paying this amount to the landlord should the tenant (your company or organization) fail the lease. With this guaranty in hand, the landlord will be paid should the tenant default on his obligations.
Do you want to lose your home and cause great harm to your family? You should never sign a personal suretyship for the full amount of your lease.
A deposit is an amount of money usually deposited in the bank account of the landlord (an escrow account) to guaranty good execution of your lease. Usually, this amount bears no interest at all, even if all or part of your deposit will be returned to you at the end of your lease, say, ten years later.
Always remember: Landlords do not own and operate buildings to collect deposits, but to collect your rent. All guaranties are negotiable.
Always add a clause stating that if the building changes hands for any reason, your deposit will automatically be reimbursed in free monthly rent. This clause will protect you in case the landlord or owner of the building sells it or goes into receivership.
Jean Louis Racine is a Commercial Lease Negotiator, accredited as a lawyer by the Québec Bar, Québec, Canada, in 1978, and as a real estate broker. If you would like more information on his new book, you may contact him at http://www.commercialeasexpert.com/.
Tags: Commercial Lease Agreement, lease space, Offer to Lease
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